REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION   

CIVIL APPEAL NO.3911 OF 2011 (Arising out of Special Leave Petition (C) No.24296 of 2009)

Dunlop India Limited  ……Appellant

Versus

A.A. Rahna and another ……Respondents

With  

CIVIL APPEAL NO.3912 OF 2011 (Arising out of Special Leave Petition (C) No.24558 of 2009)

Dunlop India Limited  ……Appellant

Versus

A.A. Sulaiman and others  ……Respondents

J U D G M E N T

G.S. Singhvi,  J.

1. Leave granted.

2. These appeals are directed against judgment dated 27.7.2009 of the  

Division Bench of the Kerala High Court whereby the revisions filed by  

the  appellant  against  the  order  passed  by  District  Judge,  Ernakulam

(hereinafter referred to as, “the Appellate Authority”) under Section 18 of  

the Kerala Buildings (Lease and Rent Control) Act, 1965 (for short, “the  

1965 Act”) were dismissed and the direction given by IIIrd Additional  

Munsiff and Rent Control Court, Ernakulam (for short, “the Rent Control  

Court”)  for vacating the suit premises was confirmed.   

3. A.B. Abdul Khader (predecessor of the respondents) leased out the  

suit premises comprised in Survey Nos.341/1 and 2 situated at Ernakulam  

village to the appellant for its godown and office for a period of 10 years  

with effect from 1.12.1966.  After 2 years and about 2 months, the parties  

executed  two lease  deeds  dated 3.2.1969,  which were  duly  registered.  

For the sake of reference, the relevant portions of the lease deed executed  

in respect of Survey No.341/1 measuring 83 cents are extracted below:

“THIS  DEED  OF LEASE  made  on  the  Third  day  of  February One Thousand Nine Hundred and Sixty Nine  corresponding  to  the  Fourteenth  day  of  Magha  One  thousand Eight  Hundred and Ninety One of the Sakha  Era  BETWEEN  A.B.  ABDUL  KHADER  son  of  Alumkaparambli  Bava,  Indian  National,  Businessman,  aged  Forty  five  years,  residing  at  Alumkaparampil,  Chittor  Road,  Ernakulam  in  the  City  of  Cochin  in  Ernakulam  District  in  Kerala  State  (hereinafter  called  “the Lessor” which expression shall unless excluded by  or repugnant to the context include his heirs, executors,  administrators  and  assigns)  of  the  One  Part  AND  DUNLOP INDIA LIMITED,  formerly  THE DUNLOP  RUBBER COMPANY (INDIA) LIMITED, a Company  duly incorporated in India having its Registered office at  Dunlop House, 57-B Free School Street, Calcutta, herein  represented by its duly constituted attorney G.S. Krishna  

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son of Govindarajapuram Subramaniam, Indian National,  Business,  Executive,  aged Forty four years,  residing at  26,  Dr.  Hedge  Road,  Nangumbakkam  in  the  City  of  Madras (hereinafter called “the Lessee” which expression  shall  unless  excluded  by  or  repugnant  to  the  context  include its successors and assigns) of the Other Part.

WITNESSES as follows:-

1. In  consideration  of  the  rent  hereinafter  reserved  and of the covenants on the part of the Lessee hereinafter  stipulated, the Lessor hereby demises unto the Lessee all  those  pieces  of  parcels  of  land  situate  in  Ernakulam  Town comprised in Survey Number 341 Sub Division 1  (part)  admeasuring  83  cents  equivalent  to  33  acres  58.844  sq.  meteres  together  with  the  buildings  and  structures erected thereon more particularly described in  the  Schedule  hereunder  written  together  with  all  the  fixtures,  fittings,  pathways,  passages,  rights  and  privileges appurtenant thereto TO HOLD the same unto  the  Lessee  for  a  term of  ten  years  from 1st December  1966 paying therefore during the continuance of the lease  a  monthly  rent  of  Rs.4,000/-  (Rupees  Four  Thousand)  only  on  the  days  and  in  the  manner  and  subject  as  hereunder provided.

(a) xxx xxx xxx     

(b) xxx xxx xxx

(c) The  Lessee  shall  permit  the  Lessor  or  his  authorised  agents  with  or  without  workmen  during  business hours to enter  upon the demised premises for  the purpose of viewing the condition thereof and from  time to time for the purpose of effecting the necessary  repairs and maintenance as hereunder provided.

(d) The Lessee shall deliver up the said demised  premises on termination of the lease in as good order and  condition  as  they  were  in  at  the  time  when  the  lease  hereby created commenced subject to determination due  to normal wear and tear and defects, if any, for want of  proper repair  and maintenance which is  the liability of  the lessor as hereinafter mentioned.

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2. The Lessor hereby covenants  with the Lessee as  follows:-

(a) Subject  to  the  due  observance  and  performance  of  the  terms,  covenants  and  conditions by the Lessee herein on their part to be  observed and performed the lessee shall have the  right during the continuance of the lease to use the  premises without interruption by the Lessor or any  person claiming under or in trust for him.

(b) xxx xxx xxx

(c) xxx xxx xxx

3. Provided always and it is mutually agreed by and  between the parties hereto as follows:

(a) Notwithstanding the period of  lease herein  before provided the Lessee shall have the option to  terminate the lease by giving three months notice  in  writing  to  the  Lessor  at  any  time  during  the  continuance of this Lease.

(b) The lessees shall have the option to renew  the lease for a further  period of ten years at  the  same  rent  and  other  terms,  covenants  and  conditions  as  existed  during the  initial  period of  ten years save and except the Clause for renewal  provided the Lessee gives notice in writing to the  Lessor three months before the expiry of the initial  period  of  ten  years  of  the  Lessee’s  intention  to  exercise the option.

(c) xxx xxx xxx  

(d) xxx xxx xxx

(e) xxx xxx xxx

(f) xxx xxx xxx

(g) The  Lessee  shall  be  at  liberty  at  its  own  costs to construct at any time and at any place of  

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the demised premises counters, strong rooms and  safe  deposit  vaults  and to  fix,  erect,  bring  in  or  upon or fasten to the demised premises and to alter  and rearrange from time to time, furniture fixtures  and fittings which the Lessee may require for its  business  such  as  partition  screens,  counters,  platforms, shelves, cases, cupboards, heavy safes,  cabinets, lockers, strong room doors, vault doors,  cabinets of any size and weight, steel collapsible  gates,  ventilators,  grills,  shutters,  sunblinds,  gas  and  electric  fittings,  stoves,  light,  fans,  air  conditioners,  sinks  and other  equipment,  fittings,  articles and things all of which the Lessee shall be  at  liberty  to  remove  at  any  time  at  its  pleasure,  before  the  expiration  or  sooner  determination  of  the  tenancy without  objection on the  part  of  the  Lessor  and  the  Lessee  shall  make  good  the  damage, if any, which may be thereby caused to  the demised premises.”

4. The appellant  exercised  the  option for  extension of  the  term of  

lease but did not vacate the premises at the end of extended period.  After  

the death of A.B. Abdul Khader, respondent No. 1 became owner of the  

property comprised in Survey No. 341/1 while respondent No. 2 became  

owner of the property comprised in Survey No.341/2.  They filed Rent  

Control Petition Nos.45 and 146 of 1999 for eviction of the appellant on  

the grounds specified in Section 11(2)(b), 11(3), 11(4)(i) and 11(4)(v) of  

the  1965  Act.  By  an  order  dated  11.4.2001,  the  Rent  Control  Court  

allowed  both  the  petitions  and  directed  the  appellant  to  vacate  the  

premises. The appeals preferred against that order were allowed by the  

Appellate  Authority  and  the  order  of  eviction  was  set  aside.   While  

reversing  the  finding  recorded  by  the  Rent  Control  Court  that  the  

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appellant  had ceased to  occupy the suit  premises  continuously  for  six  

months without reasonable  cause,  the Appellate  Authority observed as  

under:

“I find merit in the submission of the learned counsel for the  appellant that suspension of business activity on account of  extreme financial crunch, at the same time keeping the unit  open and alive for operation cannot amount to cessation of  occupation without valid reasons.  Ext. C1(a) notice conveys  eloquently that there was no intention to abandon possession  and the tenant  did continue occupation.   Business activity  was not being run on account of peculiar circumstances.  Till  2.8.1999  the  premises  were  kept  open  and  alive  for  operation.  It is important to note that the employees of the  tenant were not directed not to come to the establishment on  any day prior to 2.8.1999.  I am of the opinion that Ext.C1(a)  read as a whole can never convey to a prudent  mind that  there was cessation of occupation.  Physical inability to carry  on business activity on account of financial difficulties and  the closing down of the production in the factories cannot  ipso fact, in the facts and circumstances of the case, lead to  the conclusion that the management of the tenant (which had  kept the unit open and alive for operation till 2.8.1999) had  ceased to  occupy the building till  2.8.1999.   Cessation  to  occupy had a physical ingredient as also a mental ingredient.  Reading of Ext. C1(a) as a whole, I am unable to agree that  there  was  such  objectionable  cessation  of  occupation.  Though it indicates that there was no business activity and  the establishment remained defunct and idle, there was still  the intention to occupy and the hope that it will be possible  to resume even business activity.  The inevitable conclusion  flowing  from  Ext.C1(a)  is  that  the  employees  were  continuing  to  attend  the  offices  in  the  petition  schedule  building till 2.8.1999.  At any rate, it would be impossible to  come to a conclusion that there was cessation of occupation  prior to 2.8.1999 though I would readily agree that there was  no  business  activity  in  the  petition  schedule  building  for  some period of time even prior to 2.8.1999.  I am in these  circumstances of the opinion that Ext. C1(a), the trump card  on  which  the  landlords  place  reliance  cannot  deliver  any  crucial  advantage  or  assistance  to  the  landlords  in  their  attempt to establish cessation of occupation.”

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The Appellate Authority also referred to the Commissioner’s report  

but refused to rely upon the same by recording the following reasons:

“The inspection by the commissioner was on 10th September  and monsoon season had preceded such inspection.  Some  wild growth as indicated in Ext. C1 (assuming that Ext. C1  can be legally taken cognizance of), is not, according to me,  sufficient to establish cessation of occupation.  In the light of  the very specific statement in Ext. C1(a) that inspite of the  extreme financial crunch, the management had till 2.8.1999  kept the unit open and alive for operation and that Ext.C1(a)  notice  was  being  issued  on  2.8.1999 as  management  was  convinced that there is no prospect of running the company  immediately must definitely convey to the court that there  was no cessation of occupation prior to 2.8.1999 at any rate.  The  wild  growth  perceived  by  the  commissioner  and  reported  in  Ext.  C1 cannot  in  these circumstances  tilt  the  scales in favour of the landlords. I am in these circumstances  of the opinion that the learned Rent Control Court erred in  coming to the conclusion that the landlords have succeeded  in proving cessation of occupation for a period of 6 months  immediately  prior  to  the  filing  of  the  petitions  without  reasonable cause.  I am unable to concur with the conclusion  of the learned Rent Control Court on this aspect.  I am in  these circumstances satisfied that the challenge raised on this  ground also deserves to be upheld.”

5. Civil  Revision  Petition  Nos.579  and  580  of  2002  filed  by  the  

respondents  were  dismissed by the Division Bench of  the  High Court  

vide  judgement  dated  18.12.2006.   The  High  Court  agreed  with  the  

Appellate Authority that the evidence produced by the landlord was not  

sufficient for recording a finding that the tenant had ceased to occupy the  

premises for a continuous period of six months without reasonable cause.  

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6. During the pendency of the revisions before the High Court, the  

respondents filed fresh rent control petitions which came to be registered  

as RCP Nos.109 of 2002 and 38 of 2003 for eviction of the appellant  

under  Section  11(2)(b),  11(3),  11(4)(i)  and  11(4)(v).   This  time,  the  

respondents pleaded that the appellant herein has ceased to occupy the  

premises since September, 2001 without any reasonable cause.  Both the  

petitions  were  allowed  by  the  Rent  Control  Court  vide  order  dated  

11.2.2004,  which  was  confirmed  by  the  Appellate  Authority  by  

dismissing  the  appeals  preferred  by  the  appellant.   However,  Civil  

Revision Petition No.368 of 2005 filed by the appellant was allowed by  

the High Court vide order dated 18.12.2006 and the matter was remitted  

to  the  Rent  Control  Court  for  fresh  adjudication  of  the  rent  control  

petitions after giving opportunity to the appellant to file counter statement  

and adduce evidence.

7. After  remand,  the  appellant  filed  written  statement  and claimed  

that the petitions filed by the respondents were liable to be dismissed as  

barred by res judicata because Rent Control Petition Nos. 45 and 146 of  

1999 filed by them on similar grounds were dismissed by the Appellate  

Authority  and the High Court.   On merits,  it  was pleaded that  due to  

financial constraints, the appellant could not run its business effectively  

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and  profitably  and  it  was  declared  sick  under  the  Sick  Industrial  

Companies (Special Provisions) Act, 1985 (for short, “the 1985 Act”) by  

the  Board  for  Industrial  and Financial  Reconstruction  (BIFR)  in  Case  

No.14  of  1998  and  the  appeal  filed  against  the  order  of  BIFR  was  

pending  before  Appellate  Authority  for  Industrial  and  Financial  

Reconstruction (AAIFR). It was also averred that due to financial crisis,  

the  staff  strength  was  reduced  to  bare  minimum  but  there  was  no  

cessation of occupation of the suit premises.

8. On the pleadings of the parties, the Rent Control Court framed the  

following issues:

“(1) Whether the petition is barred by resjudicata and also  u/s.15 of the Act?

(2) Whether RW1 is having any authority to represent the  respondent?

(3) Whether  there  is  a  commercial  lease  between  the  parties as alleged?

(4) Whether  the  Petitioners  are  entitled  for  an  order  of  eviction u/s.11(2)(b) of the Act?

(5) Whether the Respondent ceased to occupy the petition  schedule buildings continuously for six months?

(6) Whether  there  is  any  reasonable  cause  for  the  cessation of occupation if any?

(7) Whether  the  Petitioners  are  entitled  for  an  order  of  eviction u/s 11(4)(v) of the Act?

(8) Relief and costs?”

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9. After  considering the  pleadings  and evidence of  the  parties,  the  

Rent Control Court held that the petitions filed by the respondents were  

not  barred by  res  judicata and Section 15 of  the  1965 Act  cannot  be  

invoked  for  denying  relief  to  them  because  two  sets  of  rent  control  

petitions were based on different causes.  However, the respondents’ plea  

that the appellant was in arrears of rent was rejected on the ground that no  

evidence  had  been  produced  by  them to  prove  the  same.   The  Rent  

Control  Court  then considered the  question  whether  the  appellant  had  

ceased  to  occupy  the  suit  premises  since  September,  2001  without  

reasonable cause and answered the same in affirmative. The Rent Control  

Court  referred  to  the  evidence  produced  by  the  parties  including  the  

reports Exhibits C1 and C2 produced by Advocate Commissioners PW2  

and PW3 and recorded the following observations:

“(i) From Ext.C1 report filed by PW2 it can be seen that  the two entrance gates on the northern side of the petition  schedule property in O.S. 109/02 is found rusted and closed.  The  boundary  fencing  on  the  northern  side  is  found  damaged.   

(ii)  The  land  surrounding  the  side  petition  schedule  building is fully covered with grass and shrubs and PW2 the  commission  even  found  it  difficult  to  walk  through  the  premises.   The  sheds  in  the  said  property  were  seen  in  dilapidated  condition  and  the  commissioner  could  not  go  near  to  the  shed  as  it  was  covered  with  tall  bushes  and  shrubs.   

(iii)  The eastern wall of the petition scheduled building in  RCP 109/02 had to rusted shutters which was seen closed.   

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(iv) It  is  also  reported  that  the  commissioner  could  not  enter into the buildings as it was closed.  On looking through  the glass window PW2 could see some furniture inside the  building which are full of dust, damaged and unfit for use.  Though the service line of electric connection to the petition  schedule  building  was  there  commissioner  verified  and  found that the electric connection being disconnected.   

(v) PW3 is the advocate commissioner who had inspected  the  petition  schedule  building  RCP  No.38/03  and  filed  Ext.C2  report  it  can  be  seen  that  the  petition  schedule  building in  RCP 38/2003 was lying closed at  the  time of  both the inspections made by PW3.  The commissioner has  also noted the notice fixed in the front shutter of the petition  schedule building by Sri A.K. Agarwal Company Secretary  on 1.10.2001 stating that the Respondent company is a sick  industrial  company  under  the  Sick  Industrial  Companies  (Special Provisions) Act and operations at Kochi has been  suspended w.e.f. 1.10.2001 onwards.  It is also mentioned in  ex.C2 that the front shutters and the shutters provided at the  eastern side are full of dust and the same were rusted due to  non  use,  and  the  entire  compound  around  the  petition  schedule building are full of bush and the bushes are seen at  some places grown on to the petition schedule building and  some other  places  grown to  the  roof  of  petition  schedule  building.

(vi) The commissioner  has also noted five calendars  for  year  2001  seen  inside  the  rooms  in  the  petition  schedule  building.  PW3 also has noted that the switchboard provided  at  the  eastern  and  western  wall  of  the  petition  schedule  building were not having electricity supply. It is also noted  that  the  four  iron  gates  provided  for  the  compound  were  covered with dust and rust due to non use.   

(vii) Even  though  the  condition  of  the  petition  schedule  buildings happened to be as noted by PW2 and PW3 to a  limited extent to non-maintenance and repairs it  cannot be  found  that  it  happened  only  due  to  non-maintenance  and  repairs.   

(viii) The calendars for the year 2001 noted by PW3 inside  the  petition  schedule  building  in  RCP  No.38/03  and  the  

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notice dated 01.10.2001 affixed at  the front  shutter of  the  same building clearly shows that both the petition schedule  buildings were not been opening from 1.10.2001 towards till  the  inspection date.   Since the  petition  schedule  buildings  were not opened since September, 2001 the inability of the  Petitioner to carry out the repairs and maintenance also is to  be looked into.”   

   (emphasis supplied)

10. The Rent Control Court then considered the plea of the appellant  

that on account of pendency of the proceedings under the 1985 Act, the  

staff strength was reduced to bare minimum but discarded the same on  

the  ground  that  staff  attendance  register,  muster  roll,  wages  register  

maintained in the office as also the document showing purchase and sale  

of the goods, payment of electricity charges etc. had not been produced  

showing payment of the dues since September, 2001 and observed:

“The specific  case of RW1 is that  due to the proceedings  under the provisions of Sick Industrial Companies (Special  Provisions)  Act,  the  staff  strength  of  the  Respondent  company  was  reduced  to  bare  minimum  at  the  petition  schedule buildings.  According to RW1 even though there  were  such  proceedings  respondent  was  functioning  in  the  schedule  buildings  with  minimum  staff.   During  cross  examination RW1 admitted that the staff attendance register,  muster roll wages register etc are maintaining in the petition  schedule  buildings.   She  also  admitted  that  they  are  maintaining stock register in the petition schedule buildings.  But  none  of  there  documents  are  produced  before  court.  According to RW1 she omitted to produce these documents.  Had  these  documents  for  the  relevant  period  come  in  illegible/- the details regarding the strength of the staff and  the  business  being  carried  on  is  the  petition  schedule  buildings would have been revealed.  She also admitted that  documents are maintained regarding the purchase and sale  done in the petition schedule buildings but those documents  

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are also not produced before court. …………… The specific  case of PW1 is that the electric connection was disconnected  more  than  1½  years  before.   But  according  to  RW1  the  electricity  connection  was  disconnected  only  two  months  prior to her examination before court.  If there was actually  electric  supply  to  the  petition  schedule  buildings  and  the  Respondents had paid the electricity charge definitely RW1  could  have  produced  the  electricity  bill  pertaining  to  the  petition  schedule  buildings.   Though RW1 stated  that  she  can  produce  the  electricity  bill  from  2001  September  onwards pertaining to the petition schedule buildings neither  of them has been produced till now.  From all these it can be  seen that the Respondents were not occupying the petition  schedule buildings from 2001 September onwards, and they  had  ceased  to  occupy  the  petition  schedule  buildings  continuously for more than six months.

According  to  RW1  respondent  could  not  conduct  the  business in full swing in the petition schedule building due  to BIFR and AAIFR proceedings.   Ext.B9 is  the order  of  AAIFR,  New  Delhi  in  appeal  No.1/02  wherein  the  Respondent is the appellant.  On perusal of Ext.B9 it can be  seen that several reliefs and concessions were given to the  Respondent company by the AAIFR.  But as per ext.B9 no  restriction  is  seen  imposed  on  the  work  of  respondent  company  all  together  or  particularly  in  the  schedule  buildings  at  Cochin.  ….....................................  As  already  observed  respondents  could  not  produce  any  of  the  mandatory  prescribed  registers  such  as  stock register,  day  book, muster roll, attendance register wages register etc. to  show that any business were being carried out in the petition  schedule buildings even with minimum staff.  Even it was  specifically put to RW1 that due to the proceedings before  BIFR  and  AAIFR,  whether  the  board  of  directors  was  resolved to reduce the staff strength she answered that the  staff  were  told not  to come and they have agreed for the  same.   It  is  something  unbelievable.   RW1 has  produced  Ext.B13 series to B25 series invoices to show that they are  conducting business to the scheduled property.  But on going  through ext.B13 series to ext.B25 series it cannot be found  that  those  transactions  were  made  through  Kaloor  Office  where  in  the  petition  schedule  building  situates  as  these  invoices  were  given  to  the  Chennai  office  of  respondent.  The learned counsel for the Petitioner has pointed out that in  

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ext.B11 series and B12 series after the Chennai address of  the Respondent company it is seen typed in another machine  in  Ext.B11  series  and  written  in  another  handwriting  in  Ext.B12 series, “through Kaloor Office Cochin”.  The same  and address of the purchasing dealer in all these documents  are  the  Chennai  address  of  the  Respondent  company.  Ext.B11 series to ext.B25 series cannot be relied on to show  that business was being conducted in scheduled buildings.  It  is also to be noted that ExtB11 series to B25 series are of the  year 2006 and these do not in any help the Respondents to  show that any business was being conducted in the petition  schedule building in between September, 2001 and filing of  these RCPs.  It is also admitted by RW1 that copy of invoice  are to be given at the check post.  But ext.B11 to B25 series  produced are having 4 to 6 copies of each invoices.  If while  passing the sales tax check post copy of invoices were given  as stated there would not have been such number of copies at  in  ext.  B11  to  B25  series.   Therefore  the  genuineness  of  these documents are also doubtful.  On a perusal of the entire  evidence it  can be seen that  the  Respondent  has failed  to  prove that the cessation of occupation of petition schedule  buildings for the continuous period of more than six months  were due to the restrictions imposed by BIFR and AAIFR.  Hence these points are found in favour of the Petitioners.”

(emphasis supplied)

11. On the basis of above analysis of the pleadings and evidence, the  

Rent Control Court concluded that the appellant had ceased to occupy the  

suit premises since September, 2001 without any reasonable cause and,  

accordingly, directed it to vacate the premises.

12. The  Appellate  Authority  independently  examined  the  pleadings  

and evidence of the parties and reiterated the finding recorded by the Rent  

Control Court that the appellant had ceased to occupy the premises since  

14

September,  2001 and  that  the  pendency  of  the  proceedings  under  the  

1985 Act cannot be construed as a reasonable cause for non occupation of  

the premises.

13. The Division Bench of the High Court, though not required in law  

to do so, minutely scrutinized the evidence produced by the parties and  

concurred with the Rent Control Court and the Appellate Authority that  

the respondents had succeeded in making out a case for eviction of the  

appellant  under  Section  11(4)(v).  The  High  Court  referred  to  the  

expression “reasonable cause” used in Section 11(4)(v), the judgment in  

Paulina Joseph v. Idukki District Wholesale Co-operative Consumer  

Stores Ltd. (2006) 1 KLT 603 and observed:

“Interpreting the scope and meaning of “reasonable cause”  provided in section 11(4)(v) of the Act a Division Bench of  this  Court  in  Paulina Joseph vs Idukki  District  Wholesale  Co-operative  Consumer  Stores  Ltd.,  (2006  (1)  KLT  603)  held that if there is a plausible explanation to the question  why the business was not run in the premises continuously,  it may be a relevant fact in considering whether there was  reasonable cause for cessation of occupation.  But it is held  that existence of such reasonable cause depends on the facts  and circumstances of each cases.  It is further held that the  occupation of the building depends on the purpose for which  it is let and the purpose for which it is used.  The nature of  the business and the requirement of the physical presence or  otherwise of the tenant in the building for the conduct of the  business is a relevant fact.  But in this case on considering  the  facts  the  requirement  of  physical  presence  is  highly  essential to observe that the tenant company is continuing in  occupation,  because  the  tenanted  premises  is  occupied  as  their office and godown.  The burden to prove that there is  reasonable cause for non occupation is solely on the tenant  

15

when  it  is  proved  that  there  is  cessation  of  physical  occupation.  

The question to be examined is whether on the facts of this  case  the  tenant  was  successful  in  proving  any  such  reasonable  cause.   The  rent  control  petitions  were  filed  during the years 2002 and 2003.  It has come out in evidence  that the tenant ceased to occupy the premises since last so  many years from the date of filing of the rent control petition  itself.   Further  it  has come out  in evidence that  since the  lapse  of  more  than  six  years  from  filing  of  rent  control  petitions, still as on today, it is conceded that the company  could  not  resume  business  of  physical  occupation  at  the  tenanted premises.  Therefore we have no hesitation to hold  that  the  tenant  was  not  successful  in  establishing  any  genuine  intention  or  hope  of  reviving  the  physical  occupation  not  it  was  successful  it  establishing  any  reasonable cause for the cessation of occupation.”

14. Shri R.F. Nariman, learned senior counsel for the appellant argued  

that the impugned judgment and the orders passed by the Rent Control  

Court and the Appellate Authority are liable to be set aside because the  

Rent Control Petition Nos. 109 of 2002 and 38 of 2003 were barred by  

res judicata. Learned senior counsel submitted that the issue whether the  

appellant had ceased to occupy the building continuously for six months  

without  reasonable  cause  had  already  been  decided  against  the  

respondents  in  the  proceedings  arising  out  of  Rent  Control  Petition  

Nos.45 and 146 of 1999 and, as such, the second set of petitions filed on  

the same cause were not maintainable.  He further submitted that even  

though two sets of rent control petitions related to different periods, the  

evidence produced by the respondents to prove their case with reference  

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to  Section  11(4)(v)  was  substantially  the  same  and  the  Rent  Control  

Court committed serious error by passing an order of eviction ignoring  

the contrary finding recorded by the Appellate Authority and the High  

Court in the earlier round of litigation and this error was repeated by the  

Appellate Authority and the High Court while dismissing the appeals and  

revisions filed by the appellant.  Shri Nariman argued that the finding  

recorded by the Rent Control Court and the Appellate Authority that the  

appellant  had ceased to occupy the suit  premises  continuously for six  

months without reasonable cause was based on misreading of evidence  

and  the  High  Court  committed  serious  error  by  approving  the  same  

ignoring the finding recorded in the earlier round of litigation, which had  

become final.   Learned senior counsel emphasized that due to pendency  

of proceedings under the 1985 Act, the appellant could not effectively  

use the suit  premises,  but  that  did not justify a conclusion that  it  had  

ceased to occupy the premises.  He then submitted that the pendency of  

case under the 1985 Act was, by itself, sufficient for recording a finding  

that  there  was  reasonable  cause  for  the  appellant  to  have  ceased  to  

occupy the suit premises.  Shri Nariman invited our attention to order  

dated 3.3.2008 passed by AAIFR vide which the appeals filed against the  

order of the BIFR were dismissed and argued that the impugned order  

may  be  set  aside  because  the  appellant’s  financial  condition  has  

considerably improved.

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15. S/Shri S. Gopakumaran Nair and C.A. Sundaram, learned senior  

counsels for the respondents argued that the concurrent findings recorded  

by the Rent Control Court and the Appellate Authority on issue Nos.5, 6  

and 7, which have been approved by the High Court, do not suffer from  

any legal infirmity warranting interference by this Court. Learned senior  

counsel candidly admitted that the order of eviction passed in the earlier  

round  of  litigation  was  reversed  by  the  Appellate  Authority  and  the  

revisions filed by the respondents were dismissed by the High Court, but  

argued  that  the  findings  recorded  in  those  proceedings  could  not  be  

treated as  res judicata qua the petitions filed in 2002/2003 because the  

same were based on a different cause.  Learned counsel pointed out that  

in  the  first  round,  the  respondents  had  sought  eviction  under  Section  

11(4)(v)  by  alleging  that  the  appellant  had  ceased  to  occupy  the  suit  

premises from June, 1998 and in the second set of petitions, eviction was  

sought  on  the  ground  that  the  appellant  had  ceased  to  occupy  the  

premises from September, 2001.  Learned counsel pointed out that while  

the  respondents  had succeeded in proving that  the  suit  premises  were  

vacant  since  September,  2001,  the  appellant  could  not  produce  any  

tangible evidence to prove occupation of the premises or that there was  

reasonable cause for its having ceased to occupy the suit premises.  They  

emphasized that the Rent Control Court and the Appellate Authority had  

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rightly  discarded  the  evidence  of  RW1  on  the  issue  of  continued  

occupation of the suit premises because she failed to produce the staff  

attendance  register,  muster  rolls,  wage  registers,  electricity  bills  and  

payment  thereof  as  also documents  showing purchase  and sale  of  the  

goods from the suit premises.

16. We  have  considered  the  respective  submissions.  Section  11(1)  

contains a non obstante clause and declares that notwithstanding anything  

to the contrary contained in any other law or contract a tenant shall not be  

evicted  whether  in  execution  of  a  decree  or  otherwise  except  in  

accordance with the provisions of the Act. The first proviso to Section  

11(1) carves out an exception and lays down that nothing contained in  

this  section  shall  apply  to  a  tenant  whose  landlord  is  the  State  

Government or the Central Government or other public authority notified  

under  this  Act.   Second  proviso  to  Section  11(1)  carves  out  another  

exception and lays down where the tenant denies the title of the landlord  

or claims right of permanent tenancy, the Rent Control Court shall decide  

whether the denial or claim is bonafide and if it records a finding to that  

effect, the landlord shall be entitled to sue for eviction of the tenant in a  

Civil Court and such court can pass a decree for eviction  on any of the  

grounds enumerated in Section 11 even though the Court may find that  

such denial does not involve forfeiture of the lease or that the claim is  

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unfounded.  Section 11(4)(v) of the Act which has bearing on this case  

reads as under:

“(1) to (3)  xxx xxx xxx

(4) A landlord may apply to the Rent Control Court for an  order directing the tenant to put the landlord in possession of  the building,-

(i) to (iv) xxx xxx xxx

(v)  if  the  tenant  ceases  to  occupy  the  building  continuously  for  six  months  without  reasonable  cause.”

The definition of the term “building” contained in Section 2(1) is  

as under:

“(1). “building”  means  any  building  or  hut  or  part  of  a  building  or  hut,  let  or  to  be  let  separately  for  residential or non residential purpose and includes–

(a) the garden grounds well’s tanks and structures  if any, appurtenant to such building, hut, or part  of  such  building  or  hut,  and  let  or  to  be  let  along with such building or hut;

(b) any furniture supplied by the landlord for use in  such building or hut or part of a building or hut

(c) any  fittings  or  machinery  belonging  to  the  landlord, affixed to or installed in such building  or  part  of  such  building,  and  intended  to  be  used by the tenant for or in connection with the  purpose for which such building or part of such  building let or to be let,

but does not include a room in a hotel or boarding house….”    

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17. The word “occupy” used in Section 11(4)(v) is not synonymous  

with legal possession in technical sense.  It means actual possession of  

the tenanted building or use thereof for the purpose for which it is let out.  

If the building is let out for residential purpose and the tenant is shown to  

be continuously absent from the building for six months, the Court may  

presume that he has ceased to occupy the building or abandoned it.  If the  

building  is  let  out  for  business  or  commercial  purpose,  complete  

cessation  of  the  business/commercial  activity  may  give  rise  to  a  

presumption that the tenant has ceased to occupy the premises.  In either  

case, legal possession of the building by the tenant will, by itself, be not  

sufficient for refusing an order of eviction unless the tenant proves that  

there was reasonable cause for his having ceased to occupy the building.   

18. The initial burden to show that the tenant has ceased to occupy the  

building continuously for 6 months is always on the landlord.  He has to  

adduce tangible evidence to prove the fact that as on the date of filing the  

petition,  the tenant was not occupying the building continuously for 6  

months.  Once such evidence is adduced, the burden shifts on the tenant  

to prove that there was reasonable cause for his having ceased to occupy  

the tenanted premises for a continuous period of 6 months.  No strait-

jacket  formula  can  be  evolved  for  determining  as  to  what  is  the  

reasonable cause and each case is required to be decided keeping in view  

21

the nature of the lease, the purpose for which the premises are let out and  

the evidence of the parties.  If the building, as defined in Section 2(1), is  

let out for industrial or commercial/business purpose and the same is not  

used for the said purpose continuously for a period of six months, the  

tenant  cannot  plead  financial  crunch  as  a  ground  to  justify  non  

occupation of the building unless cogent evidence is produced by him to  

prove that he could not carry on the industrial or commercial/business  

activity due to fiscal reasons which were beyond his control.  If the tenant  

does not use the building for the purpose for which it is let out, he cannot  

be said to be occupying the building merely because he has put some  

furniture or articles or machinery under his lock and key.

19. At this stage, we may notice some precedents which throw some  

light  on  the  true  interpretation  of  the  expressions  “occupy”  and  

“reasonable cause” used in Section 11(4)(v) of the 1965 Act.

20. In  Ram  Dass  v.  Davinder (2004)  3  SCC  684,  this  Court  

interpreted Section 13(2)(v) of the Haryana Urban (Control of Rent and  

Eviction)  Act,  1973  in  terms  of  which  an  order  of  eviction  could  be  

passed against the tenant if he is shown to have ceased to occupy the  

premises continuously for a period of 4 months without reasonable cause.  

Respondent Davinder was tenant in the shop belonging to appellant-Ram  

Dass.  The appellant filed a petition for eviction of the respondent on the  

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ground that he had ceased to occupy the shop for a continuous period of 4  

months without any reasonable cause.  The Rent Controller analysed the  

pleadings of the parties and evidence produced by them and held that the  

appellant has been able to prove that the respondent had ceased to occupy  

the premises for a continuous period of more than 4 months and there was  

no reasonable cause for doing so.  The plea of the respondent that he had  

kept the shop closed intermittently due to sickness was not accepted by  

the  Rent  Controller.   The  Appellate  Authority,  on  an  independent  

evaluation of the evidence, confirmed the finding of the Rent Controller.  

The High Court allowed the revision filed by the respondent and set aside  

the orders of the Rent Controller and the Appellate Authority.  This Court  

reversed the order of the High Court and restored the one passed by the  

Rent Controller. The Court highlighted the distinction between the terms  

“possession” and “occupy” in the context of Rent Control Legislation in  

the following words:

“The  terms  “possession”  and  “occupy”  are  in  common  parlance  used  interchangeably.  However,  in  law,  possession over a property may amount to holding it as an  owner  but  to  occupy  is  to  keep possession  of  by  being  present in it. The rent control legislations are the outcome  of  paucity  of  accommodations.  Most  of  the  rent  control  legislations, in force in different States, expect the tenant  to  occupy the tenancy premises.  If  he himself  ceases  to  occupy and parts  with  possession in  favour  of  someone  else,  it  provides  a  ground  for  eviction.  Similarly,  some  legislations provide it as a ground of eviction if the tenant  has just ceased to occupy the tenancy premises though he  may  have  continued  to  retain  possession  thereof.  The  scheme of the Haryana Act is also to insist on the tenant  

23

remaining in occupation of the premises. Consistently with  what  has  been  mutually  agreed  upon,  the  tenant  is  expected to make useful use of the property and subject the  tenancy premises to any permissible and useful activity by  actually being there. To the landlord’s plea of the tenant  having ceased to occupy the premises it is no answer that  the tenant has a right to possess the tenancy premises and  he has continued in juridical possession thereof. The Act  protects the tenants from eviction and enacts specifically  the grounds on the availability whereof the tenant may be  directed to be evicted. It is for the landlord to make out a  ground  for  eviction.  The  burden  of  proof  lies  on  him.  However, the onus keeps shifting. Once the landlord has  been  able  to  show  that  the  tenancy  premises  were  not  being used for the purpose for which they were let out and  the tenant has discontinued such activities in the tenancy  premises  as  would  have  required  the  tenant’s  actually  being in the premises, the ground for eviction is made out.  The  availability  of  a  reasonable  cause  for  ceasing  to  occupy  the  premises  would  obviously  be  within  the  knowledge and, at times, within the exclusive knowledge  of  the  tenant.  Once  the  premises  have  been  shown  by  evidence to be not in occupation of the tenant, the pleading  of  the landlord that  such non-user  is  without  reasonable  cause has the effect of putting the tenant on notice to plead  and prove the availability of reasonable cause for ceasing  to occupy the tenancy premises.”

(emphasis supplied)

21. In Brown v. Brash (1948) 1 All. E.R. 922, the Court of appeal was  

called upon to examine correctness  of  an order  passed by the  County  

Court Judge, who upheld the tenant’s claim to possession of the premises  

and  awarded damages against the appellant for trespass. The facts of that  

case  were  that  the  premises  were  let  out  to  the  tenant  in  1941  on  a  

quarterly  rent  of  26  pounds.   In  1945,  the  tenant  was  convicted  and  

sentenced  to  serve  2  years’  imprisonment  for  stealing  6  tones  of  tea.  

24

While going to jail, the tenant left physical occupation of the premises to  

his mistress and two illegitimate children.  In March 1946, the tenant’s  

mistress left the premises and dropped the two children with his mother.  

In the meanwhile, the landlord sold the premises.  The purchaser filed an  

action in July 1946 for eviction of the tenant on the ground that he had  

abandoned possession.  The County Court Judge held that the tenant had  

not abandoned possession and that even though he failed in some of his  

obligations under the tenancy, it was not reasonable to make an order for  

possession against him.  In December 1946, the purchaser of the original  

landlord transferred the  premises  to the  appellant.   After  release from  

prison,  the  tenant  brought  an  action  for  possession  and  damages  for  

trespass.   His  claim  was  allowed  by  the  County  Court  Judge,  who  

directed the appellant to return the premises to the respondent-tenant and  

also pay damages.  The Court of appeal reversed the order of the County  

Court Judge and held:

“We  are  of  opinion  that  a  “non-occupying”  tenant  prima  facie forfeits  his status as a statutory tenant.   But what is  meant by “non-occupying”? The term clearly cannot cover  every  tenant  who  for  however  short  a  time,  or  however  necessary a purpose, or with whatever intention as regards  returning, absents himself from the demised premises.  To  retain possession or occupation for the purpose of retaining  protection the tenant cannot be compelled to spend 24 hours  in all weathers under his own roof for 365 days  in  the year.  Clearly,  for  instance,  the  tenant  of  a  London  house,  who  spends his week-ends in the country, or his long vacation in  Scotland,  does  not  necessarily  cease  to  be  in  occupation.  Nevertheless,  absence  may  be  sufficiently  prolonged  or  unintermittent  to  compel  the  inference,  prima  facie,  of  a  

25

cesser of possession or occupation.  The question is one of  fact  and  of  degree.  Assume  an  absence  sufficiently  prolonged to have this effect.  The legal result seems to us to  be as follows:-(1) The onus is then on the tenant to repel the  presumption that his possession has ceased.  (2) To repel it  he must, at all events, establish a de facto intention on his  part to return after his absence.  (3) But we are of opinion  that  neither  in principle  nor on the authorities  can this  be  enough.  To suppose that he can absent himself for 5 or 10  years or more and retain possession and his protected status  simply  by  proving  an  inward  intention  to  return  after  so  protracted  an absence would be to  frustrate  the  spirit  and  policy of the Acts as affirmed in Keeves v. Dean (1) and  Skinner  v.  Geary  (3),  (4)  Notwithstanding  an  absence  so  protracted  the  authorities  suggest  that  its  effect  may  be  averted if he couples and clothes his inward intention with  some formal, outward, and visible sign of it, i.e., instals in  the premises some caretaker or representative, be it a relative  or not, with the status of a licensee and with the function of  preserving the premises for his own ultimate home-coming.  There will then, at all events, be someone to profit by the  housing  accommodation  involved  which  will  not  stand  empty.  It  may be that  the same result  can be secured by  leaving on the premises, as deliberate symbols of continued  occupation, furniture, though we are not clear that this was  necessary  to  the  decision  in  Brown v.  Draper  (4).   Apart  from authority, in principle possession in fact (for it is with  possession in fact and not with possession in law that we are  here concerned) requires not merely an “animus possidendi”  but a “corpus possessionis,” viz., some visible state of affairs  in which the animus possidendi finds expression.  (5) If the  caretaker  (to  use  that  term  for  short)  or  the  furniture  be  removed from the premises otherwise than quite temporarily,  we are of opinion that the protection, artificially prolonged  by their presence, ceases, whether the tenant wills or desires  such removal or not.   A man’s possession of a wild bird,  which  he  keeps  in  a  cage,  ceases  if  it  escapes  notwithstanding  that  his  desire  to  retain  possession  of  it  continues and that its escape is contrary thereto.  We do not  think in this connection that it is open to the tenant to rely on  the fact of his imprisonment as preventing him from taking  steps to assert possession by visible action. The tenant, it is  true,  had  not  intended  to  go  to  prison.   He  committed  intentionally  the  felonious  act  which  in  the  events  which  

26

have happened landed him there, and thereby put it out of his  power to assert possession by visible acts after Mar. 9,1946.  He cannot,  in these circumstances,  we feel,  be in a better  position  than  if  his  absence  and  inaction  had  been  voluntary.”

(emphasis supplied)

22. In  Achut  Pandurang  Kulkarni  v.  Sadashiv  Ganesh  

Phulambrikarm, AIR 1973 Bom. 210, the learned Single Judge of the  

Bombay High Court interpreted Section 13(1)(k) of the Bombay Rents,  

Hotel  and  Lodging  Houses  Rates  Control  Act,  1947  the  language  of  

which  is  somewhat  similar  to  Section  11(4)(v)  of  the  1965  Act.  The  

learned Single Judge referred to order passed by Chagla,  C.J.  in Civil  

Revision  Application  No.1527/1953  decided  on  July  30,  1954  and  

observed:

“As observed by Chagla, C. J., in the above case, physical  possession by a tenant himself was not necessary. Physical  possession  by  other  members  of  the  family  also  is  not  necessary if there was reasonable cause for their remaining  absent from the premises. The question is one of fact  and  degree. If there is evidence on record to show that the tenant  had something more than a vague wish to return and that he  had a real hope coupled with the practicable possibility of its  fulfilment within a reasonable time, it cannot be said that he  had no reasonable cause for not using the premises. In every  case it is the duty of the Court to satisfy itself that the tenant  had  no  reasonable  cause.  Absence  may  be  sufficiently  prolonged or unintermittent to compel the inference prima  facie of a cesser of occupation. The onus is on the tenant in  such a case to repel the presumption and to establish that his  possession had not ceased or that he had ceased to occupy on  account of reasonable cause. In my judgment,  this  can be  established if the tenant proves notwithstanding the intention  

27

on his part  to return after  his absence,  his helplessness in  remaining absent from the premises.

It is true that the tenant should have made proper attempts to  discharge  the  onus  in  the  present  case  by  producing  the  orders,  if  not  before  the  trial  Court,  at  least  before  the  Appellate  Court.  That,  however,  as stated above,  does not  permit the Courts to brush aside the requirements of Section  13(1)(k). It is a matter for not awarding the costs. The Court  cannot  ignore  the  nature  of  the  tenant's  services  and  his  liability to be transferred when deciding the question under  Section 13(1)(k). I do not propose to lay down that in every  case where a Government servant is transferred and he goes  on paying rent in respect of the premises, he had reasonable  cause for not using the premises for the purpose for which  they  were  let.  The  question  will  depend  on the  facts  and  circumstances  of  each  case.  The  tenant  must  couple  and  clothe  his  inward  intention  to  return,  with  some  formal,  outward and visible sign of it, as for instance by installing  some caretaker or representative, be it a relative or not with  the status of a licensee and with the function of preserving  the premises for his own ultimate home-coming. It may also  be that  the  same result  can be secured by leaving on the  premises,  as  a deliberate  symbol of  continued occupation,  furniture. As stated by Asquith L. J., in Brown v. Brash and  Ambrose, (1948) 2 KB 247, the tenant must prove not only  animus possidendi but a corpus possessionis.”

(emphasis supplied)

23. In  Ananthasubramania Iyer v. Sarada Amma 1978 KLT 338,  

the learned Single Judge of the Kerala High Court held:

“The physical  absence of the tenant from the building for  more than six months would raise a presumption that he had  ceased to occupy the building and that he had abandoned it  and that it was for the tenant to dislodge the presumption and  establish that he had the intention to continue to occupy the  tenanted premises.”

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24. The word “occupy” appearing in Section 11(4)(v) of the 1965 Act  

has been interpreted by the Kerala High Court in large number of cases.  

In Mathai Antony v. Abraham (2004) 3 KLT 169, the Division Bench  

of the High Court referred to several judgments including the one of this  

Court in Ram Dass v. Davinder (supra) and observed:

“The  word  “occupy"  occurring  in  S.  11(4)(v)  has  got  different meaning in different context. The meaning of the  word  "occupy"  in  the  context  of  S.  11  (4)(v)  has  to  be  understood in the light of the object and purpose of the Rent  Control Act in mind. The rent control legislation is intended  to  give  protection  to  the  tenant,  so  that  there  will  not  be  interference with the user of the tenanted premises during  the  currency of  the  tenancy.   Landlord cannot  disturb the  possession  and  enjoyment  of  the  tenanted  premises.  Legislature has guardedly used the expression "occupy" in  S.1l (4)(v) instead of “possession". Occupy in certain context  indicates mere physical presence, but in other context actual  enjoyment.  Occupation  includes  possession  as  its  primary  element, and also includes "enjoyment". The word "occupy"  sometimes indicates legal possession in the technical sense;  at other times mere physical presence. We have to examine  the  question  whether  mere  "physical  possession"  would  satisfy the word "occupy" within the meaning of  S.11 (4)(v)  of the Act. In our view mere physical possession of premises  would not satisfy the meaning of "occupation" under S. 1l  (4)(v).  The  word  "possession"   means  holding  of  such  possession,  animus  possidendi,  means,  the  intention  to  exclude other persons. The word "occupy" has to be given a  meaning so as to hold that the tenant is actually using the  premises and not mere physical  presence or possession.  A  learned  single  Judge  of  this  Court  in  Abbas  v.  Sankaran  Namboodiri (1993(1) KLT 76) took the view that the word  occupation is used to denote the tenant's actual physical use  of the  building either by himself or through his agents or  employees. The Division Bench of this Court of which one  of  us  is  a  party  (Radhakrishnan,  J.),  in  Rajagopalan  v.  

29

Gopalan (2004 (1)  KLT SNP.54) interpreting S. 11 (4)(v)  took  the  view  that  occupation  in  the  context  of  S.l  1(4)  means  only  physical  occupation,  which  requires  further  explanation. Occupation in the context of S. 11(4)(v) means  actual  user.  If  the landlord could establish that  in a given  case  even  if  the  tenant  is  in  physical  possession  of  the  premises,  the  premises  is  not  being  used,  that  is  a  good  ground for  eviction  under  S.11(4)(v)  of  the  Act.   S.11(4)  uses  the  words  "put  the  landlord  in  possession"  and  not  “occupation”, but 11 (4)(v) uses the words "the tenant ceases  to  occupy".   In  S.  11  (4)(v)  in  the   case  of  landlord  the  emphasis  is  on "possession"  but  in  the  case  of  tenant  the  emphasis   is  on  "occupation".  The  word  "occupy"  has  a  distinct meaning so far as the Rent Act is concerned when  pertains to tenant, that is, possession with user.”

25. In  Kurian Thomas v. Sreedharan Menon (2004) 3 KLT 326, the  

High Court held as under:

“Once  landlord  could  establish  the  tenant  has  ceased  to  occupy the premises continuously for six months prior to the  filing of the petition he is entitled to get order of eviction  under  that  section.   The  word  “occupation”  must  be  understood  to  be  not  mere  physical  possession.   Tenant  should  use  the  building.   The  word  “occupy”  means  to  cohabit  with,  to  hold  or  have  in  possession.   Tenanted  premises must be in the state of being enjoyed and occupied.  The  word  “occupy”  used  by  the  statute  would  show that  tenanted premises be put to use.  Tenant cannot be heard to  contend  that  he  is  having  physical  possession  of  the  premises though not in occupation.  So far as this case is  concerned, we are of the view landlord has discharged the  burden and then the onus has shifted to the tenant and the  tenant could not establish that he has not ceased to occupy  the premises  and even if  there  is  cessation  that  was with  reasonable cause.”

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26. In  Paulina  Joseph v.  Idukki  District  Wholesale  Co-operative  

Consumer Stores Ltd. (supra), the Division Bench of the High Court  

referred  to  the  dictionary  meaning  of  the  word  “reasonable”  and  

observed:

“The  question  whether  the  tenant  ceases  to  occupy  the  building continuously for six months is primarily a question  of fact to be determined with reference to the facts available  in  each  case.  The  scope  of  "occupation  of  the  building"  depends on the purpose for which the building is let and the  purpose for which it is used. The nature of the business and  the requirement of the physical presence or otherwise of the  tenant in the building for the conduct of the business is a  relevant fact. No straight jacket formula can be evolved in  the  matter  of  proof  of  cessation  of  occupation  within  the  meaning of Section 11(4)(v) of the Act. This intention of the  tenant, though not conclusive as such has also relevance in  determining  whether  there  was  actual  cessation  of  occupation within the meaning of Section 11(4)(v). When it  is proved by the landlord that the tenant ceased to occupy the  building continuously for six months, the burden of proving  that there was reasonable cause for such cessation is on the  tenant.  Reasonable  cause  is  also  a  question  of  fact  to  be  decided in the light of the facts proved in the case. No rigid  formula can be evolved for proof of "reasonable cause". The  facts and circumstances of the case, the particular facts with  reference to the business activities of the tenant, the nature  of  the  business,  the  magnitude  of  the  business,  the  circumstance which led to the cessation of occupation are all  relevant in considering whether there was reasonable cause.  If  the  cessation  of  occupation  was  due  to  circumstances  beyond the control of the tenant, certainly the Courts would  be inclined to accept the case of the tenant that cessation of  occupation  was  not  without  reasonable  cause.  Financial  constraint  of  the  tenant  by  itself  may  not  be  a  sufficient  reason to hold that there was reasonable cause.   But that is  not  completely  irrelevant  in  considering  the  question.  Whether  the  tenant  is  an  individual  or  an  organization  controlled by the Government or a Co-operative society may  also be relevant  in  considering the question of  reasonable  cause. If there is a plausible explanation to the question why  

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the  business  was  not  run  in  the  premises  continuously,  it  may well be a relevant fact in considering whether there was  reasonable cause for cessation of occupation under Section  11(4)(v), depending on the facts and circumstances of each  case.  In the given set of facts and circumstances, if it can be  concluded that  an ordinary  prudent  man would act  in  the  manner in which the tenant did, it can be safely said that the  cessation of occupation was with reasonable cause.”

(emphasis supplied)

27. In  Simon & Ors. v. Rappai (2008) 2 KLJ 488, the High Court  

interpreted Section 11(4)(v) and held:

“As far  as  the  ground available  under  Section 11(4)(v)  is  concerned,  it  is  well  settled  by  various  decisions  of  this  Court that if the landlord has discharged the initial burden it  is upto the tenant to lead evidence in the matter to show that  he has been conducting business in the premises. A learned  Single Judge of this Court in the decision report in Abbas v.  Sankaran Namboodiri (1993 (1) KLT 76) while examining  the  question  held  that,  the  word  'occupation'  is  used  to  denote the tenant's actual physical use of the building either  by  himself  or  through  his  agents  or  employees  and  legal  possession is not sufficient. It was held that, "however, if a  landlord succeeds in proving that his tenant did not occupy  the building almost near the period fixed in Section 11(4)(v)  of the Act it may help the court to presume that there could  have been cessation of occupation for the statutory period.  Such background presumption is not anathematic to the law  of evidence". In para.7 it was observed that, "be that as it  may,  burden  is  on  the  landlord  to  prove  that  the  tenant  ceased to occupy the building for six months. But it is hard  to expect a landlord to prove the precise during which his  tenant ceased to occupy the building. However, if the court  is  satisfied  on  the  evidence  and/or  with  the  aid  of  presumptions that the tenant did not occupy the building for  such length of time as would cover the statutory period, then  the  burden  would shift  to  the  tenant  to  show that  he had  reasonable  cause  for  such non-occupation."  Finally  it  was  also observed in para.9 that, 'but, possession must combine  

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with  something  more  to  make  it  occupation.  Legal  possession does not by itself  constitute occupation'.  These  principles can be safely applied to the facts of this case.”

28. In this case, the Rent Control Court, after detailed scrutiny of the  

pleadings and the evidence of the parties recorded a finding that while the  

landowners  (respondents  herein)  succeeded  in  proving  that  the  tenant  

(appellant  herein) had ceased to occupy the suit  premises for a period  

exceeding six months, the latter could not prove that it was occupying the  

premises or that non occupation thereof was for a reasonable cause.  The  

Rent Control Court took cognizance of the appellant’s plea that it was  

carrying on business activities from the suit premises with reduced staff  

strength but discarded the same by observing that the relevant records  

like  the  attendance  register,  muster  roll,  wage  register  had  not  been  

produced and no evidence was adduced to prove payment of electricity  

bills and sale and purchase of goods.  The High Court also analysed the  

pleadings and evidence of the parties  and concurred with the findings  

recorded by the Rent Control Court.  As against this, the appellant did not  

produce any evidence to prove physical occupation of the premises or  

any business transaction.  It also failed to produce any evidence to show  

that there was reasonable cause for non occupation of the suit premises.  

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29. The arguments of Shri Nariman that the second set of rent control  

petitions should have been dismissed as barred by  res judicata  because  

the issue raised therein was directly and substantially similar to the one  

raised in the first set of rent control petitions does not merit acceptance  

for  the  simple  reason  that  while  in  the  first  set  of  petitions,  the  

respondents  had sought  eviction on the  ground that  the  appellant  had  

ceased to occupy the premises from June, 1998.  In the second set of  

petitions,  the  period  of  non  occupation  commenced  from  September,  

2001 and continued till the filing of the eviction petitions.  That apart, the  

evidence produced in the first set of petitions was not found acceptable  

by  the  Appellate  Authority  because  till  2.8.1999,  the  premises  were  

found kept open and alive for operation.  The Appellate Authority also  

found that in spite of extreme financial crisis, the management had kept  

the business premises open for operation till 1999.  In the second round,  

the appellant did not adduce any evidence worth the name to show that  

the premises  were kept  open or  used from September,  2001 onwards.  

The Rent  Controller  took cognizance  of  the  notice  fixed on the  front  

shutter of the building by A.K. Agarwal on 1.10.2001 that the company is  

a sick industrial  company under the 1985 Act and operation has been  

suspended with effect from 1.10.2001; that no activity had been done in  

the premises with effect from 1.10.2001 and no evidence was produced  

to  show attendance  of  the  staff,  payment  of  salary  to  the  employees,  

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payment of electricity bills from September, 2001 or that any commercial  

transaction was done from the suit premises.  It is, thus, evident that even  

though the ground of eviction in the two sets of petitions was similar, the  

same were based on different causes.  Therefore, the evidence produced  

by the parties in the second round was rightly treated as sufficient by the  

Rent Control Court and the Appellate Authority for recording a finding  

that the appellant had ceased to occupy the suit premises continuously for  

six months without any reasonable cause.

30. The question whether the prohibition contained in Section 22(1) of  

the 1985 Act operates as a bar to the maintainability of a petition filed for  

eviction of the tenant was considered and answered in negative in Shree  

Chamundi Mopeds Ltd. v. Church of South India Trust Association  

(1992) 3 SCC 1.  In that case, this Court referred to the provisions of the  

Karnataka Rent Control Act, Section 22(1) of the 1985 Act and observed:

“11.  Similarly  in  Civil  Appeal  No.  2553  of  1991  this  question  has  been  raised  by  the  appellant-company  to  challenge  the  order  of  the  learned  Single  Judge  of  the  Karnataka High Court dated March 15, 1991 dismissing the  revision  petition  under  Section  50(1)  of  Karnataka  Rent  Control Act. For the reasons aforementioned Section 22(1)  of the Act cannot be invoked to assail the said order of the  High Court on the ground that on the date of passing of the  order of the High Court the matter was pending before the  Appellate Authority. But in this appeal, the order allowing  the eviction petition was passed by the XII Additional Small  Causes Court on September 30, 1989 and at that time the  matter  under  Sections  15  and  16 was  pending  before  the  

35

Board.  It  is,  therefore,  necessary  to  consider  the  second  question about the applicability of Section 22(1) to eviction  proceedings instituted by the landlord against the tenant who  happens  to  be  a  sick  company.  In  this  regard,  it  may  be  mentioned  that  the  following  proceedings  only  are  automatically suspended under Section 22(1) of the Act: (1) proceedings for winding up of the industrial  

company; (2) proceedings for execution, distress or the like against  

the properties of the sick industrial company; and (3) proceedings for the appointment of receiver.

12.  Eviction  proceedings  initiated  by  a  landlord  against  a  tenant  company  would  not  fall  in  categories  (1)  and  (3)  referred  to  above.  The  question  is  whether  they  fall  in  category (2). It has been urged by the learned counsel for the  appellant-company that such proceedings fall in category (2)  since they are proceedings against the property of the sick  industrial  company.  The  submission  is  that  the  leasehold  right of the appellant-company in the premises leased out to  it is property and since the eviction proceedings would result  in  the  appellant-company  being  deprived  of  the  said  property, the said proceedings would be covered by category  (2).  We  are  unable  to  agree.  The  second  category  contemplates proceedings for execution, distress or the like  against any other properties of the industrial company. The  words ‘or the like’ have to be construed with reference to the  preceding  words,  namely,  ‘for  execution,  distress’  which  means that the proceedings which are contemplated in this  category are proceedings whereby recovery of dues is sought  to  be  made  by  way  of  execution,  distress  or  similar  proceedings  against  the  property  of  the  company.  Proceedings for eviction instituted by a landlord against  a  tenant who happens to be a sick industrial company, cannot,  in our opinion, be regarded as falling in this category. We  may,  in  this  context,  point  out  that,  as  indicated  in  the  Preamble,  the  Act  has  been  enacted  to  make  special  provisions with a view to securing the timely detection of  sick  and  potentially  sick  companies  owning  industrial  undertakings,  the  speedy  determination  by  a  Board  of  experts of the preventive, ameliorative, remedial and other  measures  which  need  to  be  taken  with  respect  to  such  companies and the expeditious enforcement of the measures  

36

so determined. The provision regarding suspension of legal  proceedings contained in Section 22(1) seeks to advance the  object of the Act by ensuring that a proceeding having an  effect  on  the  working  or  the  finances  of  a  sick  industrial  company  shall  not  be  instituted  or  continued  during  the  period the matter is under consideration before the Board or  the  Appellate  Authority  or  a  sanctioned  scheme  is  under  implementation  without  the  consent  of  the  Board  or  the  Appellate  Authority.  It  could  not  be  the  intention  of  Parliament  in enacting the said provision to aggravate the  financial difficulties of a sick industrial company while the  said matters were pending before the Board or the Appellate  Authority by enabling a sick industrial company to continue  to incur further liabilities during this period. This would be  the consequence if sub-section (1) of Section 22 is construed  to  bring  about  suspension  of  proceedings  for  eviction  instituted  by  landlord  against  a  sick  industrial  company  which has ceased to enjoy the protection of the relevant rent  law on account of default in payment of rent. It would also  mean that the landlord of such a company must continue to  suffer  a  loss  by  permitting  the  tenant  (sick  industrial  company) to occupy the premises even though it is not in a  position to pay the rent. Such an intention cannot be imputed  to Parliament.  We are,  therefore,  of  the view that  Section  22(1) does not cover a proceeding instituted by a landlord of  a sick industrial company for the eviction of the company  premises let out to it.”

   (emphasis supplied)

31. In Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah (1999)  

8 SCC 11, it was argued on behalf of the appellant that suit for recovery  

of rent etc. is not maintainable in view of the prohibition contained in  

Section  22(1).   While  affirming  the  judgment  of  the  High  Court,  the  

Court referred to the earlier judgment in Shree Chamundi Mopeds Ltd.  

v. Church of South India Trust Association (supra) and held:

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“Section 22 no doubt, inter alia, states that notwithstanding  any other law no suit for recovery of money shall lie or be  proceeded with except with the consent of the Board, but as  we look at it the filing of an eviction petition on the ground  of non-payment of rent cannot be regarded as filing of a suit  for recovery of money. If a tenant does not pay the rent, then  the  protection  which  is  given  by  the  Rent  Control  Act  against his eviction is taken away and with the non-payment  of rent order of eviction may be passed. It may be possible  that in view of the provisions of Section 22, the trial court  may not be in a position to pass a decree for the payment of  rent but when an application under Section 11(4) is filed, the  trial court in effect gives an opportunity to the tenant to pay  the rent failing which the consequences provided for in the  sub-section  would  follow.  An  application  under  Section  11(4), or under any other similar provision, cannot,  in our  opinion, be regarded as being akin to a suit for recovery of  money.”

   (emphasis supplied)

The  same  view  was  reiterated  in  Carona  Ltd.  v.  Parvathy  

Swaminathan and Sons (2007) 8 SCC 559.

32. We shall now examine whether pendency of the proceedings under  

the  1985  Act,  which  implies  that  the  appellant  was  facing  financial  

difficulty  in  conducting  its  business  constituted reasonable  cause  for  

cessation of occupation of the premises.  The appellant was declared a  

sick  industrial  company on 22.6.1998 and IDBI was appointed as  the  

Operating Agency under Section 17(3) of the 1985 Act to examine the  

viability  of  the  company.   Subsequently,  State  Bank  of  India  was  

appointed as the Operating Agency.  After several  hearings,  the BIFR  

passed order dated 19.10.2001 and directed the appellant to sort out all  

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pending issues with secured creditors, Central/State Governments, TIIC,  

KSIIDC and TNSEP and submit a revised comprehensive and fully tied  

up rehabilitation scheme to the Operating Agency. For the next about five  

years, no tangible step is shown to have taken by the appellant for revival  

of its business activities.  In August and November, 2006, the appellant  

filed applications before the BIFR seeking its permission for issue of two  

crore equity shares of Rs. 10/- each fully paid up at par to the company’s  

promoters  and/or  its  associates  on private  placement  basis  against  full  

consideration  to  be  utilized  for  rehabilitation.   Thereupon,  the  BIFR  

passed  order  dated  16.3.2007.    Three  appeals  were  filed  against  that  

order.   The  AAIFR  dismissed  the  appeals  after  taking  note  of  order  

passed by the Madras High Court in Writ Petition (C) No. 24422 of 2006,  

order dated 25.4.2007 passed by the Orissa High Court in W.P (C) No.  

344 of 2008, order dated 5.2.2008 passed by this Court in SLP(C) CC  

Nos. 1943-1944 of 2008 and held that in view of the various orders, the  

net worth of the appellant having turned positive and it can no longer be  

treated as sick industrial company.   

Before the Rent Control Court, the appellant had neither pleaded  

nor any evidence was produced to show that due to financial stringency  

was due to the reasons beyond its control and on that account, the suit  

premises  could  not  be  used  from  September,  2001  onwards  for  the  

purpose specified in the lease deeds.  Therefore, the so called financial  

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stringency cannot be construed as reasonable cause within the meaning of  

Section 11(4)(v).    

33. We are also of the view that order dated 3.3.2008 passed by the  

AAIFR  has  no  bearing  on  the  decision  of  the  issues  raised  by  the  

respondents in the context of Section 11(4)(v) of the 1965 Act because  

what  was  required  to  be  considered  by  the  Rent  Control  Court  was  

whether as on the date of filing the petition the appellant had ceased to  

occupy  the  premises  continuously  for  a  period  of  six  months  without  

reasonable  cause.   The  improvement  in  the  financial  health  of  the  

appellant after many years cannot impinge upon the concurrent finding  

recorded by the Rent Control Court and the Appellate Authority that the  

respondents  had  succeeded  in  making  out  a  case  for  eviction  under  

Section 11(4)(v) and that there was no reasonable cause for the appellant  

to have ceased to occupy the suit premises continuously for a period of  

six months.   

 34. In the result, the appeals are dismissed.  The parties are, however,  

left to bear their own costs.  The appellant is allowed three months time  

to  deliver  vacant  possession  of  the  suit  premises  to  the  respondents  

subject to its filing usual undertaking before this Court within four weeks.  

It is also made clear that during this period of three months, the appellant  

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shall not induct any other person in the premises or transfer its possession  

to any other person in any capacity whatsoever.  

…..…..…….………………….…J. [G.S. Singhvi]

…..…..……..…..………………..J.                          [Asok Kumar Ganguly]

New Delhi May 4, 2011.

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