The legal status of a company and the lifting of the corporate veil to determine the bonafide need of the landlord under rent control legislation.

JUDGMENT :

1. The present petition, under Article 227 of the Constitution of India, has been preferred by the petitioner to assail the judgment dated 19.09.2022 passed by PA/Civil Judge, Jaspur in Rent Control Case No. 1 of 2021 titled “Dr. Shailendra Mohan vs. Ajay Agarwal and another”, and to dismiss PA Case No. 1 of 2021 aforesaid.

2. The petitioner, admittedly, is a tenant of respondent No. 1 in respect of a non-residential property. In fact, the tenancy has continued over generations. The respondent instituted the aforesaid eviction case for release of the shop-in- question under Section 21(1)(a) of the U.P. Act No.13 of 1972.

3. The bonafide need disclosed by the respondent/landlord was for the expansion of the business of his son Siddharth Mohan Singhal-who is running his business of production of edibles under the name and style of ‘M/s Zippy Edible Products Private Limited’. The said eviction proceedings were contested by the petitioner/tenant. One of the objections/defences raised by the petitioner to the maintainability of the petition itself was that the bonafide need expressed by the landlord was not in respect of his personal need, not even that of his son, but the need was that of the Company, namely, M/s Zippy Edible Products Private Limited, which is a separate juristic entity. Therefore, according to the petitioner, the said need of M/s Zippy Edible Products Private Limited could not be considered as a bonafide need of the landlord either for himself, or of his son.

4. The Courts below have returned concurrent findings of facts, including on the aforesaid submission of the petitioner.

5. The submission of learned counsel for the petitioner is that the Allahabad High Court has, in a similar case, held that the need of a Company in the name of which the business may be carried-on could not be considered as the need of the landlord. In this regard, he has placed reliance on Bilal and another vs. 2nd Additional District and Sessions Judge, Bulandshahar [2003(52) ALR 410] (Civil Misc. Writ Petition No. 38093 of 2000, decided on 1st July, 2003).

6. Learned counsel submits that in the said case, the said legal plea was not even raised before the Trial Court in the pleadings. However, in the present case, the aforesaid plea was squarely raised by the petitioner in his written statement. The Allahabad High Court held in favour of the tenant by observing as follows:-

“11. A company is an artificial person. It has separate legal identity than its share holders. More than a century ago, House of the Lords in Salomon v. Salomon 1897 AC 22 at Page 51 and 53, observed that:

‘The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act. That is, I think, the declared intention of the enactment.

It has become the fashion to call companies of this class "one man companies". That is taking a nickname, but it does not help one much in the way or argument. If it is intended to convey the meaning that a company which is under the absolute control of one person is not a company legally incorporated, although the requirements of the Act of 1862 may have been complied with, it is inaccurate and misleading.'

12. This is also the law in our country and the Saloman case still holds the field. The Supreme Court in Shubhra Mukharjee v. Bharat Cocking Coal Ltd. AIR 2000 SC 1203, (the Shubhra case) observed as follows:

‘The principle laid down in Saloman case more than a century ago in 1897 by the House of Lords that the company is at law a different person altogether from the subscribers who have limited liability, is the foundation of joint stock com