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Andhra Pradesh High Court
Judges : K.JAYACHANDRA REDDY, P.KODANDA RAMAYYA
Vali Pattabhirama Rao - Appellant
Versus
Ramanuja Ginning and Rice Factory (P.) Ltd. - Respondent
Decided On : 12-26-83
The court held that a conveyance is not necessary to vest the property of the firm when the same was converted into a company. The court also held that a conveyance is not necessary to claim title by the company in respect of the property acquired by the promoter before its incorporation. The court further held that the plaintiffs are estopped from filing the present suit as they have acquiesced in the mode of enjoyment of the plaint schedule property by the 1st defendant.
Fact of the Case:
The plaintiffs, grandsons of one Vali Subbarayudu, filed a suit for eviction of the defendants from the plaint schedule site after declaring the suit lease as duly terminated, removing the structures and deliver vacant possession of the same. The suit land was granted to Nidumukkala Subbarayulu, the grandfather of the plaintiffs, by Vali Subbarayudu under a permanent lease deed dated 10-7-1903. Nidumukkala Subbarayulu entered into a partnership with 47 other persons for constructing the factory. The said deed recites that the partners obtained the lease under Ex. A-1 for the purpose of constructing a joint factory and they constructed the buildings and installed machinery and were carrying on the business since 4-5-1904. Subsequently, those partners and the lessee under Ex. B-54 constituted the said firm into a private limited company named as Sri Ramanuja Ginning and Rice Factory (Private) Limited, Vijayawada, the 1st defendant herein in the year 1920. The original lessor Vali Subbarayudu died in the year 1951. It appears that the lessee Nidumukkala Subbarayudu has no children. The 13th defendant was added as a party defendant by the plaintiffs but subsequently they disputed his right in the suit property and the Court below also held that he is not entitled to any rights in the suit property on additional issue No. 1 framed on 28-1-1974. During the lifetime of Vali Subbarayudu he collected the rent from the 1st defendant and subsequently his son Raghavaiah collected the rent from the 1st defendant till 1956. It is admitted that the rent was paid till 1-1-1960 and subsequently the 1st defendant filed the suit O. S. No. 1/66 on the file of Principal Subordinate Judge’s Court, obtained a decree against the plaintiffs and brought their interest (lessor’s interest) in the suit property for sale. The present suit was filed to indict the sale of further proceedings in execution. It is also not disputed that the subsequent rents are deposited in the Court by the 1st defendant. The plaintiffs having failed to satisfy the money decree obtained against them instituted the present suit in order to avert the sale of their interest in the suit property and issued quit notice dated 24-2-1967 terminating the tenancy and filed the present suit.
Finding of the Court:
The court held that the lease deed dated 10-7-1903 is a permanent lease and it can enure beyond the lifetime of the original lessee and the 1st defendant did not commit any breach of covenants of the lease, the plaintiffs and their predecessors-in-interest have acquiesced in the mode of enjoyment of the plaint schedule property by the 1st defendant and hence they are estopped from filing the present suit and there is no default in payment of the rent by the 1st defendant, and the 2nd defendant and their legal representatives have no rights in the suit property and the plaintiffs have no right to terminate the lease and obtain possession of the property and consequently dismissed the suit.
Issues: 1. Whether a conveyance is necessary to vest the property of the firm when the same was converted into a company? 2. Similarly whether such conveyance is necessary to claim title by the company in respect of the property acquired by the promoter before its incorporation? 3. No transfer of original lessee’s interest in fact took place under the terms of Ex. B-53 to the firm formed by the said lessee, and if so the said transfers is void as Section 108 (j) Proviso of Transfer of Property Act is attracted. 4. The partnership entered into by the original lessee consisting of more than 20 persons is illegal under the Indian Companies Act, 1913, and any transfer of his interest to the said firm is illegal and inoperative. 5. When the previous firm was converted into 1st defendant company a conveyance is necessary to vest the property of the firm in the company. 6. Similarly a conveyance is necessary for the 1st defendant company to claim title in the leasehold interest acquired by the original lessee under Ex. A-1. 7. The possession of the 1st defendant is only that of a tenant holding over after the death of the original lessee and the tenancy is terminable on quit notice. 8. The 1st defendant is liable to be evicted as there is a breach of covenant for non-payment of rent and for committing waste. 9. The plaintiffs and their predecessors-in-interest had acquiesced in the enjoyment by 1st defendant company of the suit property and hence they are estopped from seeking eviction. 10. The 1st defendant has perfected title by adverse possession for permanent lessee’s interest.
Ratio Decidendi: The court held that a conveyance is not necessary to vest the property of the firm when the same was converted into a company. The court also held that a conveyance is not necessary to claim title by the company in respect of the property acquired by the promoter before its incorporation. The court further held that the plaintiffs are estopped from filing the present suit as they have acquiesced in the mode of enjoyment of the plaint schedule property by the 1st defendant.
Final Decision: The appeal was dismissed.
P. KODANDARAMAYYA, J.
( 1 ) AMONG numerous questions of law two interesting Company Law problems are raised in this Civil Appeal by Sri T. Veerabhadraiah, the learned counsel for the appellants. (1) Whether a conveyance in necessary to vest the property of the firm when the same was converted into a company? (2) Similarly whether such conveyance is necessary to claim title by the company in respect of the property acquired by the promoter before its incorporation? A considerable time and lengthy debate had taken place and hence we are impelled to state this in the forefront. Now we shall state the facts.
( 2 ) THE plaintiffs in O. S. No. 36 of 1969 on the file of the Subordinate Judge s Court, Vijayawada are the appellants in this appeal. The suit is laid for eviction of the defendants from the plaint schedule site after declaring the suit lease as duly terminated, removing the structures and deliver vacant possession of the same. The plaintiffs are grandsons of one Vali Subbarayudu and it is averred that the said Subbarayudu granted a lease to one Nidumukkala Subbarayulu the suit land for the purpose of constructing and running a Ginning and Rice and Oil Factory under a lease deed dated 10-7-1903 and the said lease though called a permanent lease was a tenancy at will and the said lease will enure to the life of the original lessee only and the original lessee constituted the 1st defendant firm with himself and other sharers and erected the factory of the 1st defendant and the 1st defendant paid the rents due till 1-1-1969 and committed default in payment of half yearly rents and the 1st defendant also committed breach of covenants of the aforesaid lease described kin paragraph 7 in detail and the lease aforesaid offends the rule of propertuities and consequently void. It was further alleged that handing over of the leased premises by the original lessee to the 1st defendant is unauthorised and hence the 1st defendant cannot claim to continue to be in possession and hence the plaintiffs terminated the tenancy in respect of the plaint schedule properties and hence the defendants should deliver possession of the property and that the 2nd defendant inaliciously set up the claim to a portion of the plaint schedule site and the 1st defendant failed to set off the rents due against the decretal dues in O. S. No. 1 of 1966 and hence the suit.
( 3 ) THE 1st defendant, a private limited company registered under the India Companies Act, 1913 filed a written statement contending that the lease dated 10-7-1903 was a permanent lease in favour of Nidumukkala Subbarayudu and the said property is continuously under the possession and enjoyment of the lessee and his successor-in-interest and is being used for the purposes contemplated in the original lease and there is no default in payment of rent and the allegation of breach of covenants of the lease deed is incorrect. The original lessor, his son and the present plaintiffs know that the 1st defendant is running the factory and acquiesced in the manner of enjoyment by the 1st defendant and hence they are estopped from questioning the rights by the 1st defendant and the plaintiffs have taken considerable amounts by way of advance from the 1st defendant and having committed default in payment of those amounts the 1st defendant obtained a decree in O. S. 1/1966 on the file of Principal Subordinate Judge s Court, Vijayawada against the plaintiffs and the same is being executed and the plaintiffs suit for the adjacent land on the basis of trespass passed in O. S. No. 79/69 is frivolous and vexatious and the 2nd defendant has no rights in the property and is not a necessary party and the same is liable to be dismissed.
( 4 ) THE 2nd defendant is the former managing Director of the 1st defendant firm and after his death defendants 3 to 12 were added as his legal representatives. 13th defendant was added by the plaintiffs themselves as adopted son of the original lessor. The 14th defendant was also
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