Inducting A Partner To Tenanted Premises Will Not Amount To Subletting Only When Such Partnership Is Genuine: SC [Read Judgment]

The Supreme Court has observed inducting the partner in his business or profession by the tenant will not amount to Sub-Letting only when such partnership is genuine.

In A.Mahalakshmi vs. Bala Venkatram (D), while allowing the appeal against the High Court judgment which had set aside an eviction order, the bench comprising Justices Ashok Bhushan and MR Shah observed that if the purpose of such partnership is ostensible in carrying on business or profession in a partnership but the real purpose in sub­letting such premises to such other person who is inducted ostensibly as a partner then the same shall be deemed to be an act of subletting.

The bench observed that sub­letting means transfer of an exclusive right to enjoy the property in favour of the third party. To constitute a sub­letting, there must be a parting of legal possession, i.e., possession with the right to include and also right to exclude others, it said. The court further said:

Sub­letting, assigning or otherwise parting with the possession of the whole or any part of the tenancy premises, without obtaining the consent in writing of the landlord, is not permitted and if done, the same provides a ground for eviction of the tenant by the landlord. When the eviction is sought on the ground of subletting, the onus to prove sub­letting is on the landlord. As held by this Court in the case of Associated Hotels of India Limited v. S.B. Sardar Ranjit Singh, AIR 1968 SC 933, if the landlord prima facie shows that the third party is in exclusive possession of the premises let out for valuable consideration, it would then be for the tenant to rebut the evidence. "

The bench referred to decision in Celina Coelho Pereira v. Ulhas Mahabaleshwar Kholkar, (2010) 1 SCC 217 wherein following principles were laid down:

• In order to prove mischief of subletting as a ground for eviction under rent control laws, two ingredients have to be established, (one) parting with possession of tenancy or part of it by tenant in favour of a third party with exclusive right of possession and (two) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent.
• Inducting a partner or partners in the business or profession by a tenant by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of sub­letting, the court may tear the veil of partnership to find out the real nature of transaction entered into by the tenant.
  
• The existence of deed of partnership between tenant and alleged sub­tenant or ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of crossexamination, making out a case of sub­letting or parting with possession in tenancy premises by the tenant in favour of a third person.
  
• If tenant is actively associated with the partnership business and retains the control over the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession.
  
• Initial burden of proving subletting is on landlord but once he is able to establish that a third party is in exclusive possession of the premises and that tenant has no legal possession of the tenanted premises, the onus shifts to tenant to prove the nature of occupation of such third party and that he (tenant) continues to hold legal possession in tenancy premises.
  
• In other words, initial burden lying on landlord would stand discharged by adducing prima facie proof of the fact that a party other than tenant was in exclusive possession of the premises. A presumption of sub­letting may then be raised and would amount to proof unless rebutted."
  

In this case, eviction proceedings under Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 was initiated against the landlord against the tenants. On appreciation of evidence on record, the bench observed that there is no genuine partnership and the tenant has come out with a case of partnership only to get out from the allegation of sub­letting. 

Case name: A.Mahalakshmi vs. Bala Venkatram (D)
Case No.: C.A. 9443 Of 2019 
Coram: Justices Ashok Bhushan and MR Shah

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