Judgement

BHARGAVA, J. : The first appellant, Messrs. Delhi Motor Company, is a partners ship firm (hereinafter referred to as "the firm"), of which the other four appellants Nos. 2 to 5 are partners. Respondent No 6, New Garage Ltd. is a private limited company (hereinafter referred to as "the Company"), of which respondent No. 1 was the Managing Director, and respondents Nos. 2 to 5 were members of the Board of Directors. The firm brought a suit against the Company far possession of part of the building known as "Scindia House" situated in Connaught Circus, New Delhi, on the basis of an agreement of sub-lease. Possession was claimed of a portion of the Show-Room on the ground floor, of 1/2 portion of the Balcony, and another portion of the premises which were, in the year 1950, in the possession of Messrs. Kanwar Brothers Ltd. The case put forward by the firm was that the Company was the tenant of Scindia House and was in occupation of the Show-Room and other parts of the building, while a part of it was occupied by Messrs. Kanwar Brothers Ltd. as sub-lessee of the Company. According to the firm, the agreement to sub-lease, or the sub-lease on the basis of which possession was claimed by the firm from the Company, is evidenced by three documents, the first one of which is letter, Ext. P. 1, dated 20th February. 1950, written by K. S. Bhatnagar, appellant No. 2, on behalf of the firm, to U. A. Bagrurkar, respondent No l, who was the Managing Director of the Company. The second document is letter, Ext. P. 2, dated 22nd February, 1960, written by respondent No. l Basrurkar to appellant No. 2 Bhatnagar; and the third document is Ext. P. 3, which purports to be notes on agreement arrived at between Basrurkar and Bhatnagar on 22nd February, 1950. The case of the firm was that, though these documents did not purport in so many words to be an agreement of sub-lease to be granted by the Company to the firm, in substance and in fact, the agreement arrived at was of a sub-lease in respect of the premises mentioned above. Since, under the Delhi and Ajmer Merwara Rent Control Act 19 of 1947, if a sub-lease had been granted by the Company to the firm without the consent of the landlord, the Company would have been liable to ejectment from the premises, the agreement was not made as directly evidencing a sub-lease, so that the landlord should not have an opportunity of suing the Company for ejectment. In February, 1950, when the agreement evidenced by these three documents was arrived at, respondent No 1, U. A. Basrurkar as Managing Director did not have the authority to enter into this transaction on behalf of the Company with the firm and, consequently, on 22nd March 1950, the Board of Directors of the Company, by a resolution Ext. P 9, authorised the Managing Director to enter into this transaction. Thereafter, the firm came into possession of two portions of the leased property and started its business in them with effect from 1st April, 1950. The two portions of the leased property which came into the possession of the firm were a portion of the Show-room on the ground floor and a half portion of the balcony on the first floor. The agreement contained in these letters and documents also required parties to carry out some other obligations and, according to the firm, it complied with them. In order to avoid the liability of the Company for ejectment under the Delhi and Ajmer Merwara Rent Control Act, 1947, the agreement wag sought to be given the form of a partnership; and in order to enable the Company to enter into such a transaction, a special resolution Ext. P. 4 was passed on 24th November, 1950 at an Extraordinary General Meeting of the Shareholders of the Company amending the Memorandum of Association of the Company. This amendment was subsequently approved by the District Judge and was registered with the Registrar of Companies. So far as the landlord is concerned, he was not a party to these transactions, though, on 5th April,