It is unlawful for a tenant to sublet the premises – Supreme Court

On 21 March 2023 Supreme Court in a recent Judgement (Yuvraj @ Munna Pralhad Jagdale & Ors Vs. Janardan Subajirao) considered the provisions of Section 13(1)(e) and Section 15(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 ,  noted that, in the absence of a notification by the State Government permitting the transfer of interest in premises held under leases or a class of leases, it is unlawful for a tenant to sublet the premises let out to him or to assign or transfer in any manner his interest therein.

Civil appeals relate to a dispute over the possession of a leased property in Pune. The case started with a lawsuit filed in 1985 by the predecessors-in-title of the appellants seeking eviction of the tenant under the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947. The trial court ruled in favor of the plaintiffs, and the decision was upheld on appeal in 1991. However, the tenant filed a writ petition in 1992, and in 2008, the Bombay High Court quashed the eviction order, stating that there was no evidence of sub-tenancy. The plaintiffs filed a review petition, but it was dismissed in 2009. The two judgments are now being appealed.

A case involving a property dispute in Pune, India. The leased property was used as a hotel business by the tenant, Janardhan Subajirao Wide. The landlord and landlady, the predecessors-in-title of the appellants, filed a case for eviction of the tenant on the grounds of unauthorized construction of a toilet and breach of contract. The tenant denied the allegations in his written statement. The court examined three witnesses, including the landlord, the advocate-commissioner, and the tenant. The evidence provided by the witnesses was contradictory. The plaintiff's lawyer argued that the tenant had given possession of the leased premises to Krishna B Shetty and illegally constructed a toilet without the landlord's consent. The defendant's lawyer denied these allegations. The court accepted the plaintiff's case and granted eviction. The tenant died during the appeal process, and the appellants filed an application to condone the delay and set aside the abatement of the appeal. The court allowed the application and permitted the substitution of the legal heirs of the deceased respondent.

The trial Court made findings on three issues framed before it. The first issue was whether the defendant had erected a permanent structure on the suit premises without the plaintiff's written consent, which the court answered in the affirmative. The second issue was whether the defendant had unlawfully given on license, assigned, or transferred his interest in the suit premises after the commencement of the B.R. Act (Amendment Act of 1973), which the court answered in the affirmative. The third issue was whether the plaintiff was entitled to a decree for possession, which the court answered in the affirmative. The Trial Court also examined the grounds raised under Section 13(1)(b) and Section 13(1)(e) of the Act of 1947 and held that there was no evidence of a toilet being constructed in the leased premises, but there was evidence to support the plaintiff's claim that the defendant had assigned or transferred the business to a third party in violation of the lease agreement, and therefore, the plaintiff was entitled to a decree for possession.

The Additional District Judge affirmed the findings of the Trial Court and dismissed the Civil Appeal filed by the tenant. However, the Bombay High Court reversed the findings of both the lower courts and held that the proviso to Section 15(1) of the Act of 1947 allowed a statutory tenant to transfer his tenancy rights even if the lease agreement prohibited such a transfer. The High Court also noted that the tenant had not left the premises and was involved in the business as a partner, and therefore, the agreement executed by the tenant did not amount to sub-letting. The High Court set aside the decree of eviction/possession and dismissed the suit. The High Court dismissed the Review Petition filed by the appellants, reiterating that there was no error on the face of the record warranting exercise of review jurisdiction.

The parties did not provide all relevant documents in the case, including the original lease deed and a judgment in a related civil suit. The issue is whether the tenant breached the lease condition by assigning his business to the leased premises, warranting eviction. The tenant denies the breach, but his admissions during deposition suggest otherwise. The High Court allowed the transfer of tenancy rights under Section 15(1) of the Act of 1947, and the Supreme Court must adjudicate based on the available evidence.

Supreme Court considered the provisions of Section 13(1)(e) and Section 15(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. The Court noted that, in the absence of a notification by the State Government permitting the transfer of interest in premises held under leases or a class of leases, it is unlawful for a tenant to sublet the premises let out to him or to assign or transfer in any manner his interest therein.

The Court observed that the lease deed in this case contained a clear interdiction against transfer or assignment by the tenant of the business being run in the leasehold premises in favour of a third person. The Court also noted that certain documents that were relied upon by the parties were not produced before the appropriate authorities in keeping with due procedure and at the appropriate time, and hence, were liable to be eschewed from consideration. Based on the material available on record, the Court adjudicated on the issue of whether the tenant committed a breach of the lease condition with regard to assignment of his business in the leased premises, warranting his eviction under Section 13(1)(e) of the Act of 1947.

The Supreme Court observed that the execution of an assignment agreement by the tenant, whereby the tenant assigned his business in the leasehold premises to a third party, constituted a breach of the lease condition and the statutory mandate. This was because the lease deed clearly prohibited subletting, and the relevant sections of the Act of 1947 also prohibited the tenant from assigning the leasehold interest to a third party without the landlord's written consent. The fact that the assignee was not successful in his specific performance suit against the tenant was irrelevant to the determination of whether the tenant had committed a breach of the lease condition.

The Supreme Court, therefore, set aside the judgments of the Bombay High Court and restored the judgment of the Trial Court, which had directed the tenant to vacate the suit premises and hand over vacant and peaceful possession thereof to the landlord. The legal representatives of the deceased tenant were given two months to comply with this order, failing which the landlord would be at liberty to initiate execution proceedings before the competent court.

Yuvraj @ Munna Pralhad Jagdale & Ors Vs. Janardan Subajirao