Amalgamation and tenancy rights: court-sanctioned vesting can amount to parting with possession under rent control law.

A court-sanctioned amalgamation that vests lease, tenancy and occupancy rights in a transferee company amounts to parting with possession for the purposes of section 14(1)(b) of the Delhi Rent Control Act, even if the transfer follows commercial regulation rather than a voluntary sub-lease or assignment. The provision turns on the fact of transfer of possession, and the ground of eviction is attracted once the original tenant ceases to exist in law. The corporate veil could not be lifted to treat the original tenant as still in occupation, because there was no basis to regard the transferee's separate existence as a cloak for fraud or illegality. The eviction order was upheld.

---

---

Issues: (i) Whether a scheme of amalgamation sanctioned under the Companies Act, 1956, by which the lease and tenancy rights of the original tenant vested in the transferee company, prevented the application of section 14(1)(b) of the Delhi Rent Control Act; (ii) Whether the court could disregard the separate corporate personality of the transferee company and treat the original foreign tenant as still being in possession for the purposes of eviction.

Issue (i): Whether a scheme of amalgamation sanctioned under the Companies Act, 1956, by which the lease and tenancy rights of the original tenant vested in the transferee company, prevented the application of section 14(1)(b) of the Delhi Rent Control Act.

Analysis: Section 14(1)(b) of the Delhi Rent Control Act applies where, without the landlord's written consent, the tenant sub-lets, assigns, or otherwise parts with possession of the whole or any part of the premises. The provision turns on the factual transfer of possession and does not make any exception based on whether the transfer was voluntary, compelled by commercial regulation, or brought about under a court-sanctioned amalgamation. The scheme of amalgamation in the present case transferred the transferor company's lease, tenancy, and occupancy rights to the transferee company, and the transferor company thereafter ceased to exist in law. The earlier authorities on amalgamation and tenancy rights establish that such vesting amounts to parting with possession within the meaning of the Rent Control Act.

Conclusion: The amalgamation did not protect the tenant from section 14(1)(b); the ground of eviction was attracted.

Issue (ii): Whether the court could disregard the separate corporate personality of the transferee company and treat the original foreign tenant as still being in possession for the purposes of eviction.

Analysis: The doctrine of lifting the corporate veil is applied to prevent fraud, illegality, or misuse of the corporate form, or in other exceptional circumstances recognised by law. It is not available to a company to assert that it should be treated as still existing for one statutory purpose while denying that legal consequence for another. Once the amalgamation became effective, the original tenant lost its separate identity and the transferee company became the entity in occupation and carrying on business in the premises. No factual or legal basis existed to treat the corporate structure as a mere cloak for fraud or to ignore the transferee's separate legal existence.

Conclusion: The corporate veil could not be lifted in favour of the appellant, and the transferee company was treated as the occupant liable to eviction.

Final Conclusion: The appeals failed, and the eviction order was upheld with costs, while the appellant was granted time to vacate on filing the usual undertaking.

Ratio Decidendi: Where tenancy or lease rights are transferred to a transferee company under a court-sanctioned amalgamation and the original tenant ceases to exist as a separate legal entity, the tenant has parted with possession within the meaning of section 14(1)(b) of the Delhi Rent Control Act, and the ground of eviction is made out despite any regulatory compulsion for the amalgamation.

---