Jural Relationship Of Landlord And Tenant Is Established If Employee Is Given Rent-Free Accommodation By Company: Karnataka High Court

The Karnataka High Court has held that by providing a rent-free accommodation, as a term of employment, would create a jural relationship of a 'landlord and tenant' between an employer and an employee.

A single judge bench of Justice N S Sanjay Gowda dismissed a petition filed by Chinnaswamy K who had sought quashing of the judgment and decree dated 08.06.2023 passed by the small causes court, allowing the suit filed by Theosophy Company (Mysore) Pvt Ltd and directed the petitioner to vacate the suit schedule property and hand over possession of the same to the respondent herein.

The bench said “Providing a rent-free accommodation, as a term of employment, would create a jural relationship of a 'landlord and tenant' even between an employer and an employee. This is because the component of rent is a part of his emolument which results in an employee getting a reduced salary. The Trial Court was thus justified in coming to the conclusion that there did exist a jural relationship and the suit filed for eviction was perfectly maintainable and the plea of adverse possession sought to be raised was a false and specious plea.”

The company contended that the petitioner was appointed at their establishment as a watchman and as per the terms of this employment, the petitioner herein was given medical benefits as well as rent-free quarters for the purpose of accommodation in the schedule property that belonged to the Company. The petitioner attained the age of superannuation on 30.11.2016 but refused to vacate the schedule property.

However, the petitioner argued that the defendant herein is a non-existent company and that his family had perfected their title to the suit schedule property by way of adverse possession, and, for this reason, the suit for eviction was not maintainable. The petitioner also averred that he was not employed by the plaintiff-company but was selling vegetables in the neighbourhood along with his father, in addition to engaging in some gardening work in the area. It is further stated that since the suit schedule building was in a dilapidated condition, the petitioner's family restored the same and began living in it.

The bench noted that the respondent-Company has produced its Articles of Association as well as the Memorandum of Association to prove that they were an existing Company. They have also produced their Income Tax Returns filed in the name of the respondent-Company, their bank statements, a certificate issued by a company secretary, and balance sheets, in addition to a certified copy of the certificate of incorporation for having been registered under the Mysore Company's Act, 1938 to establish that the plaintiff company was not a defunct company.

The Company also produced a registered gift deed and the Khatha certificates which indicated that the Khata was registered in its name to establish its ownership of the scheduled property and on the basis of these records. Thus it said, “The Trial Court was right in recording a finding that the suit property did belong to the respondent-plaintiff.”

Rejecting the contention of adverse possession and the petitioner not being an employee of the company, the bench referred to the appointment letter issued to the petitioner and the bank statement indicating regular credit of salary by the company.

Then it said “The petitioner was an employee of the respondent—Company and he was also provided rent free accommodation. This memorandum also contains the signature of the petitioner, signifying his assent to the terms of the employment. This document, coupled with the salary register and the bank statement which establishes regular payment of salary to the petitioner, proves without any doubt that he was an employee of the respondent— Company and had been provided with the suit property as rent-free accommodation as a perquisite of his employment.”

Following this it held “The Trial Court has duly considered the material on record and has passed a reasoned and elaborate order, and has rightly ordered the petitioner to deliver possession to the respondent—Company. Consequently, I find no merit to interfere with the order passed by the Trial Court and the present revision petition is, therefore, dismissed.”

The court also imposed a cost of Rs 50,000 on the petitioner for raising a false plea regarding adverse possession and also questioned the title of his employer who had provided him rent-free accommodation.

Appearance: Advocate M N Sathya Raj for Petitioner.

Advocate Ajay Kadkol T for Respondents.

Citation No: 2024 LiveLaw (Kar) 226

Case Title: Chinnaswamy K AND Theosophy Company (Mysore) Pvt Ltd

Case No: CIVIL REVISION PETITION NO. 483 OF 2023

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