Allied Laws

21.  Demerger – No prior approval taken before demerger to transfer the lease rights – Transfer fee rightly charged. [Companies Act, 1956]

Sections 391 and 394 – Allenby Garments Pvt. Ltd. and Ors. vs. West Bengal Industrial Development Corporation Ltd. and Ors. AIR 2018 (NOC) 527 (CALcutta)

The facts of the case are that with a view to promoting garment trade, the Garment Corporation undertook a project called Garment Park Module. It invited applications from interested parties for allotment of commercial space (module) and car parking space in the project. A company by the name of Eastern Metalik applied for it.

Physical possession of the module was given to Eastern Metalik and possession certificate dated 11 September, 2008 was issued by the Corporation in favour of Eastern Metalik. Eastern Metalik filed an application for its demerger under the provisions of the Companies Act, 1956. The scheme of demerger was sanctioned by the Court by reason whereof the garment division of Eastern Metalik stood transferred to and vested in Allenby. Thereafter, Allenby wrote a letter to the Managing Director of the Corporation recording the factum of demerger of Eastern Metalik and vesting of the garment division of Eastern Metalik in Allenby and requesting for effecting registration of the said module in favour of Allenby. However, the Corporation had decided to register the said module along with car parking space in the name of Allenby subject to payment of Rs. 30.34 lakh as transfer fee to the Corporation.

A Writ petition was filed stating that the additional amount of transfer fee charged was illegal and arbitrary.

The Court observed that the transfer processing fee of 5% of the initial sub-lease premium would be applicable where the transfer of the sub-lease is made with prior permission of the Corporation. In the present case, admittedly no prior consent was taken by Eastern Metalik before going through the process of demerger and transferring its garment division to Allenby. No prior permission of the Corporation was asked for or obtained before putting Allenby in physical possession of the Module in question. The scheme of demerger is not binding on the Corporation.

Since Allotment does not give any indefeasible right to have a lease/sub-lease executed in favour of the allottee, the allotment of the module which was in favour of Eastern Metalik, Allenby cannot be called as an allottee. Hence, neither Eastern Metalik nor Allenby can be presently said to be a sub-lessee in respect of the said module.

It was held that, although Allenby might have stepped into the shoes of Eastern Metalik in so far as the garment division of Eastern Metalik is concerned by reason of demerger, the fact remains that Eastern Metalik and Allenby are two separate legal entities and it cannot be said that Allenby is an allottee due to the reason of demerger. Since specific approval was supposed to be taken, which was not done in the present case, Allenby is rightly charged the transfer fees.

22.  Gift Deed – Attestation by two witnesses mandatory. [a. Hindu Succession Act, 1956;

b. Transfer of Property Act, 1882]

a. Section 14, b. Section 123  – Radha Sah vs. Girja Devi AIR 2018 PATNA 115

The plaintiffs filed a case against the appellant for declaration that the registered deed of gift executed by the plaintiff’s husband in favour of the defendant and registered deed of gift executed by the plaintiff’s husband’s first wife in favour of the defendants in respect of a property were void. The plaintiffs alleged that the said transaction i.e. the deeds of gift to transfer of property does not bind the plaintiffs.

The main contention of the plaintiffs was that the property in question is a co-parcenary property and such property was alienated in the form of gifts against the mandate of law and that the gift deeds were sham and void.

It was observed by the court that the property acquired by the plaintiff’s husband’s first wife was a self-acquired property in terms of section 14 of the Hindu Succession Act, 1956. Hence, she could alienate the property. It was also observed that there was no bar even on a co-parcener and he/she can make a gift of his undivided interest in the coparcenary property to another coparcener or to a stranger with the prior consent of all other coparceners. Such a gift would be quite legal and valid.

The court held that property which the plaintiff’s husband’s first wife had gifted was her self-acquired property. Hence, she was competent to gift the same. However, the deed of gift executed by Tulni Devi is not according to law or as required by section 123 of the Transfer of Property Act as it is not attested by two witnesses. In view of the aforementioned defect, the said deed of gift stood void and is not executed according to law.

23.  Mesne Profits – Tenant did not vacate the building for 18 years – Was liable to pay damages at the rate of Rs. 5/- per square feet per month with a 10% escalation. [Transfer of Property Act, 1882]

Section 106 – Badri Vishal vs. The Kshatriya Rajput Sabha Kutbiguda, Hyderabad AIR 2018 (NOC) 516 (UTR.)

In the present case, the defendant-tenant had not vacated the property for a period of 18 years even after the notice of termination from the lessor.

The Court observed that a tenancy that was terminated in the year 1999 has still not resulted in the tenant vacating the building. The tenant is continuing to enjoy the building by paying rent at old rate after 18 years also. The Hon’ble Supreme Court of India in various cases talks of the need to award damages etc., as per market value and mesne profits to offset the delays. Even while granting injunction, in one case, the need for imposing a condition to give mesne profits and market rent while granting injunction has also been stressed by the highest court of law. The law which admittedly is not static should change and recognise the need for modification to suit the times. Therefore, to offset legal delays; to protect an innocent landlord and to discourage a clever tenant the Court has to award damages for use and occupation at the prevalent/current market rents. This will deter unscrupulous tenants from clinging onto the property for years together, taking advantage of the period in which the matter is pending in the Court. Even if the delay is genuine, there will be a realistic amount realized by awarding damages at current rates.

The Court held that the defendant is liable to pay damages for use and occupation of the premises @ Rs. 5/- per square feet per month for the suit property from the date of the suit till the date of this order along with escalation of 10% per annum as is being paid by all other tenants in the building and as noticed by the lower Court.

24.  Succession of Property – Property in India – Can be inherited by a foreign national. [Succession Act, 1925]

Section 2 – B. C. Singh vs. J.M. Utarid AIR 2018 SUPREME COURT 2374

Plaintiff, an Indian-Christian had purchased a property in India. However, the plaintiff died leaving no issue. The question arose as to who was entitled to inherit the property.

The plaintiff had invited the defendants to stay at the property that he had purchased. After the death of the plaintiff, the legal representatives of the deceased contested in the court that the defendants were only licencees and the license was terminated, and were not the owners or co-owners of such property. The contention of the defendants was that they were the relatives of the plaintiff and hence, the property was to devolve upon the defendants.

There was an alternate contention that even if the defendants were related to the plaintiff, they could not succeed since the plaintiff had a sister and that she would be a preferential heir as compared to the defendants.

The defendants argued that the sister of the plaintiff would not be entitled to the property since she was a Pakistani National.

The Court held that the Indian Succession Act, 1925 would be applicable to the succession of the property left by the plaintiff. This Act does not bar the succession of property of any Indian Christian by a person who is not an Indian national. There is no prohibition for succession of the property in India by a foreign national by inheritance.

25.  Will – Testator blind – No restriction of execution of a Will by a blind person. [Indian Succession Act, 1925]

Section 59 – Chhotey Lal and Ors. vs. Ram Naresh Singh and Ors. AIR 2018 (NOC) 621 (ALLahabad)

One of the issues was that the unregistered Will set up by the respondent was surrounded with doubt and uncertainty particularly on account of admission that the testator was blind, illiterate and was of extreme old age and hence the Will was not a genuine document and was not executed properly.

The Court observed that where a document is registered, there is a general presumption that the same has been executed and registered in accordance with law, unless the presumption is rebutted by placing reliable and cogent evidence but where the document is unregistered and creates suspicion on the face of it, the propounder of the Will is required to prove its due execution and in such cases the duty of the court also increases so as to satisfy itself that the Will is not surrounded by any suspicious circumstances and has been executed by the executant out of his or her freewill and also that the executor was in free mental condition at the time of execution of Will.

The Court held that section 59 of the Indian Succession Act provides, that every person of sound mind not being a minor may dispose of his property by way of Will. It has further been clarified that a married woman may also dispose of by Will, any property which she could transfer by her own act during her life.

It is also provided that the persons who are deaf, dumb or blind are not incapacitated for making a Will if they are able to know what they do by it. Thus, there is no restriction on execution of a Will by a blind person, provided, of course, that he is able to know what he is doing.