1. ' This is Ilnd Appeal against Judgment of Vth Civil Judge, Karachi dated 18th February 1970 and of Vllth Additional District and Sessions Judge, Karachi dated 4th March, 1977 whereby the prayer of the appellants for ejectment of the respondents was disallowed.
2. ' The respondent No. 1 was the tenant of the appellants in respect of premises bearing No, 21/8, 3rd Floor, Writers Chambers, Dunnoli Road, Karachi, since 1972. The appellants moved an application in 1975 for ejectment of respondents No. 1 and 2 on the ground that respondent No. 1 had sublet the premises to respondent Nos.
2. The respondents in their joint written statement submitted that they had been the tenants since 1972 and respondents Nos. l and 2 are the same persons who are carrying on business in the style of Premier Mercantile Service since 1973, and that rent has been paid in the name of respondent No, 2 from October, 1973 upto May, 1975 are same persons.
3. ' Issue was framed whether the opponent No. 1 had sublet the premises in dispute to opponent No, 2 without the consent of the appellant S. M. Yousuf examined himself for appellant and produced agreement Exh. A-I between the three appellants and Premier Mercantile Service through their Partner Capt. Haleem A. A. Siddiqui Number of receipts were produced to show that the appellants had always treated Messrs Mercantile Service as their tenant till 3rd of April, 1975. The ejectment application was filed in July 1975. On 24th November 1973 vide Exh. A-4 the appellant had sent a notice to respondent No. 1 to remove a table from the common passage and the same was replied by respondent No, 2 denying the allegations on 28th November, 1973 vide Exh. A-3. On 10th December, 1973 vide Exh. A-6 the appellants again wrote to respondent No. 1 drawing their attention that their letter of 24th November, has been replied to by a Company and pointing out the respondent No, I that the appellants had not so far been advised of any change in the status of respondent No. 1 and calling upon the respondent No. 1 that if the firm had been merged with the Company then a copy of Memorandum of Association and Articles of Association of the Company along with names of the Directors-be supplied. There was no reply from respondent No. 1 or 2 to Exh. A-6. However, the admitted position is that respondent No, 2 continued sending the cheques of rent regularly to the appellant and the appellant continued to draw the receipts in the name of respondent No. 1. Sometime later the respondent No, 2 started putting on rubber endorsement at the back of the cheque showing that the amount has been received from respondent No. 1 but the appellants in order to safeguard their position always signed by the said endorsement after writing the words "received on behalf of Messrs Premier Mercantile Service". On 8th May, 1975 the appellants wrote to respondent No. 1 (Exh. A-38) that the appellants do not recognise Messrs Premier Mercantile Service as their tenant and that cheque sent by respondent No, 2 has been presented for encashment subject to that verification. On 13th May, 1975 vide Exh. A-39 the respondent No, 2 sent a reply to the appellants that Premier Mercantile Service, after having this firm registered with the Registrar Joint Stock Companies, has become a limited company under the name and style of Premier Mercantile Service Limited. All the former partners of the firm, as had been provided in the agreement deed have become Directors. On 31st May, 1975 the respondent No, 2 sent the Memorandum and Articles of Association of respondent No, 2 to the appellant (Exh.
4. A-41) Exh. A-42 alongwith certificate of incorporation dated 7th March, 1973. The first object of the Company was "(1) to acquire and take Stevedoring, Dobasing and Shipping Agents business of Premier Mercantlie Service". The Articles of Association showed 5 Directors of the said Company inciuding Capt. Haleem Ahmad Siddiqui and 4 others, vide a Exh. A-43 dated 9th June, 1975 the appellants wrote to the respondent No, 2 contending that the firm had sold out the specified business to respondent No, 2 which had neither taken over the liability nor the assets of the firm.
5. The respondent No, 2, was, therefore, not accepted as tenant and was called upon to vacate the premises. The Manager of respondents, M. Akhtar deposed that there were 5 partners of respondent No. 1, namely (1) I. A. Abbasi, (2) Capt. Haleem Siddiqui, (3) Pervez Abbasi, (4) Mst.
6. Haleema, and (5) Begum A. Khatoon and respondent No. 1 was doing business of stevedoring and Tally Contractors and respondent No, 2 is doing the same business. He stated that same persons were doing same business and respondent No, I did not sublet the premises. In cross-examination he admitted that , Exh. A-2 which was receipt of vacant possession of premises dated 23rd September, 1972 was signed only by Capt. Haleem Siddiqui as a partner of respondent No. 1 and similarly the agreement of tenancy Exh. A-1 was also signed by Capt. Haleem Siddiqui on behalf of respondent No. 1 as partner. He admitted that no business was carried on in the name of the respondent No. 1. He also admitted that respondent No, 2 had taken all the assets and liabilities of respondent No. 1. He also admitted that permission had not been obtained from the appellant because respondents Nos. 1 and 2 were the same. He also admitted that Bills of rent and receipts of rent are in the name of respondent No. 1.
7. ' It was admitted position that respondent No, I was a partnership firm while the respondent No, 2 is the limited Company. The contention of the appellants was that they are different entities and therefore there was subletting while the contention of the respondents was that same members of respondent No, I was the members of respondent No, 2 and they were doing the same business and therefore there was no subletting. The respondents also took up the position that since the appellants had taken rent from them for about 2 years therefore, they consented in writing that respondent No, 2 was their tenant. The Rent Controller wt. Hout discussing the issue came to the conclusion that there was no subletting and dismissed the application. Before the learned Additional District Judge, the respondents did not deny the legal position that respondents Nos. 1 and 2 are two distinct and separate entities. But it was argued before me that the appellants had by their conduct impliedly consented and accepted respondent No, 2 as their tenant and they had in any case waived the forfeiture by failing to take any action for ejectment for two years. Their reasoning was based on the receipts by the appellants of the cheques issued by the Managing Director on behalf of respondent No, 2 every month.
8. ' The learned Additional District Judge held that it was in the knowledge of the appellant that the premises in dispute had been sublet and/or transferred by respondent No. 1 to respondent No, 2 and the appellant continued to accept rent tendered by respondent No, 2 which were signed by their Managing Directors and, therefore, it had amounted to consenting to the subletting. Relying upon the provision of section 115 of the Evidence Act, the learned Additional District Judge held that the appellants were estopped from denying the relationship between themselves and the respondent No, 2, which came into existence because they continued to accept the monthly rent tendered by respondent No, 2 in spite of their knowledge that respondent No, 2 has been inducted into the premises in dispute by respondent No. 1 illegally and without their consent in writing.
9. ' Mr. Hassan Akbar, learned counsel for the appellants has submitted that the subletting had been clearly established, but the order of the Rent Controller was merely arbitrary and he had not considered anything, while the Additional District Judge had taken a misconceived view on estoppel and therefore, the findings of the two Courts could not he called concurrent and they are in any case incorrect. This submission of appellants as to decision of Rent Controller is correct as the Rent Controller without discussing any evidence, had come to the conciusion that there was no subletting. The Additional District Judge had come to the conclusion that there was subletting but the applicants were estopped from challenging the subletting. Mr. Dobash. Learned counsel for the respondents had however, submitted that it was not a case of subletting as the members of respondent No, 2 and respondent No. 1 were exactly the same and it was a mere change in name or rather a mere addition of the word 'limited' after the name of respondent No 1. Mr. Dobash had however conceded that be could not argue that respondents Nos. 1 and 2 were exactly the same as it was not possible for him in law to do so as a limited concern acquires a different status in law after its registration as a joint stock company. He however, wanted me to pierce the veil of incorporation of respondent No, 2 in order to ascertain that the same members of respondent No. 1 firm merged themselves into a joint stock company in the name of respondent No, 2 and that it was just the same thing and there was no difference between respondent No. 1 and respondent No
2. He relied upon PLD 197i SC 585 relevant pages 616 and 617 where it was observed by the Supreme Court that there are also other circumstances in which veil had been pierced and the separate legal entity theory given the go-by. It is correct, that in the case cited by Mr. Dubash the Supreme Court had been pleased to lift the veil of incorporation in the particular circumstances of that case and came to the conclusion that the facts of that case indicated that the firm although incorporated as a Company, was still continuing to function as a partnership firm. But that finding was arrived after looking at the transactions of the company which were regarded in every sense as the dealings of a proprietor or partner of a firm who did not treat the assets of the firm as separate from his private property. But in the present case before me there is no evidence to the effect that the Directors of Premier Mercantile Service Limited had mixed up the assets of the Company with their own assets and were treating the same as mere partnership firm and were using the name of the Company as a mere cloak for the partnership firm and in these circumstances no justification existed to give a go-by to the theory of separate entity.
10. ' Moreover, the veil of incorporation has been allowed to be lifted in case of insolvency, fraud or other special circumstances shown in the particular circumstances of those cases. I. However, do not find any justification for piercing the veil of incorporation in this case as no special case has been made out for the same Mr. Dubash has not been able to cite any case-law where the veil of incorporation was pierced in such circumstances. Hence in law Premier Mercantile Service is a different entity from the company known as Premier Mercantile Service Limited, even if the members of the partnership and the company may be the same.
11. ' It would be useful to reproduce here the famous passage from the speech of Lord Macnaughton in the case of Salomon v. Salomon (1) as reproduced on page 616 of PLD 1971 SC 585 : "The company is at law a different person altogether from the subscribers to the memorandum ; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons manage and the same hands receive the profits. The company is not in law the agent of subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act."
12. These observations are very apt in all cases where no foundation is laid for lifting the veil of incorporation as in the case before me and I therefore hold that respondent No, 2 is a separate entity from respondent No, I.
13. ' Mr. Hassan Akbar had relied upon PLD 1974 SC 351, where the Supreme Court had held as under :- "If a person obtains leasehold rights in his own name and subsequently assigns them to a firm or a private limited company consisting of family members it cannot be said that no change has taken place in the status of the tenant or that it is not a case of subletting or assignment of leasehold rights."
14. In view of dictum of their Lordships of the Supreme Court 1 have no option but to hold that in the present case in view of the fact that Premier Mercantile Service was different entity from Premier Mercantile Service Limited, and that the company had taken over the business of Premier Mercantile Service and since the company had paid the rent all along and was in possession of the premises therefore there had been an assignment of tenancy by the respondent No. 1 in favour of respondent No, 2 and the same was not allowed in law and therefore respondent No. 1 had forfeited the tenancy and therefore both respondents should have been directed to vacate the premises in question.
15. ' Mr. Hassan Akbar has also contended that there was absolutely no justification to hold that the appellant had consented to subletting or that {{FOOT NOTE}}
(1) 1897 A C 22 {{FOOT NOTE}} ' a relationship of landlord and tenant had been established between the appellant and respondent No, 2 as held by the Additional District Judge. I find substance in these submissions.
16. There was relationship of landlord and tenant only between the appellant and respondent No. 1 and when respondent No, 2, for the first time wrote a letter Exh. A-5 to the appellants in 1973, the appellants by their letter addressed to respondent No. 1 dated 10th December, 1973 Exh. A-6 refused to treat the respondent No, 2 as their tenant and asked for a copy of memorandum and Articles of Association of the Company alongwith the names of Directors in case respondent No. 1 had merged with respondent No,
2. Surprisingly the respondents kept quiet over the matter and merely started sending the cheques of respondent No, 2 cowards rent. But these cheques were not accompanied by any letter and these cheques were sent in reply to the bills for rent sent by appellant in the name of respondent No. 1 and the receipts of rent were also sent by appellant in favour of respondent No. 1. Therefore D there could be no consent to the subletting in these circumstances as the respondents had not made any statement about merger till 1975. Mere acceptance of cheques of respondent No, 2 could not make them the tenants as bills were addressed to respondent No. 1 and the receipts were also issued in favour of respondent No. 1.
17. There was thus no question of existence or acceptance of relationship of landlord and tenant between respondent No, 2 and the appellants. On the other hand the appellants were anxious to avoid that relationship and had clearly refused to treat respondent No, 2 as their tenant. After some time the respondent No, 2 sent cheques of rent which have a stamp to the effect that payment of the cheque has been received from Premier Mercantile Service Limited, but the appellant did not sign that stamp as it was but signed the said stamp after adding the words "on behalf of Premier Mercantile Service". Thus the appellants had always made it clear that they were accepting the rent only on behalf of the 'firm of Premier Mercantile Service which was their tenant and not from the company which was trying to offer the rent. Even then the receipts for all these cheques were issued in favour of respondent No, I only and thus at no time the appellant had accepted respondent No, 2 as their tenant and the finding of the Additional District Judge in this regard is unfounded. Mere tender of rent by respondent No, 2 cannot make them tenants particularly when the bills and receipts are issued to respondent No. 1.
18. ' It was only on 13th May, 1975 vide Exh. A-38 that the respondent No, 2 confirmed that respondent No, I had merged itself with respondent No, 2 and later on 31st May, 1975 respondent No, 2 sent copy of Memo of Articles of Association to the appellants vide Exh. A-41, and immediately thereafter the appellants issued a notice of ejectment and refused to accept respondent No, 2 as their tenant and immediately thereafter in July, 1975 the ejectment proceedings were initiated. In these circumstances it is idle to contend that there was any relationship of landlord and tenant between the appellants and respondent No, 2 or that the appellants could be estopped from challenging such relationship by its conduct. Even the conduct of the appellants was clear from the very beginning that they were anxious to avoid recognizing respondent No, 2 as their tenant and were insisting that they will have nothing to do with respondent No,
2. As far as payment of rent by respondent No, 2 was concerned the appellants were not bothered and could not concerned as to who bad made the payment of rent as long as it was made in response to the bills issued to respondent No. 1 and the person, when was issuing the cheque was satisfied with the receipt of rent issued in favour of respondent No. 1. There was thus no estoppel attracted in these circumstances.
19. In any case no representation of any sort had been made by the appellant to either of the respondents by the acceptance of these cheques and none of the respondents had made any change in its status or position by the acceptance of these cheques of rent by the appellants as the respondents had merged themselves with each other before these cheques were issued and the subletting of tenancy had taken place without the consent in writing of the appellants and liability of forfeiture had been incurred, but the appellants were not informed of the same directly till 1975.
20. ' Mr. Dubash wanted to argue that there was at least waiver of foreiture by acceptance of cheques for two years. He relied upon PLD 1978 Lahore 1054, where an individual had taken a shop on rent, but thereafter the tenant had entered into a partnership and the landlord, knowing that the shop had been in use of the partnership firm for years, had been accepting rent from the firm throughout, the landlords were hold to have waived their right to eject the tenants.
21. I do not agree that in this case there has been any waiver. The respondents had kept the merger as secret till 1975 and the appellants F applied for ejectment as soon as merger was made known to them. Moreover, in the Lahore case cited above the position of subletting was known to the landlord from 1967 to 1973 and in spite of that they continued to accept the rent from the firm and thus facts of Lahore case are not applicable to the case before me where it cannot be said that the appellants had ever agreed even impliedly to waive their rights.
22. ' Waiver has been explained in A 1 R 1935 P C 79 as an agreement to release or not to assert a right but in the particular circumstances of the case before me I do not find any material to hold that the appellants had released the respondent No. 1 from the liability of forfeiture or that the appellants had ever agreed not to assert the right of ejectment, ' The result is that the judgments and decrees of the two lower Courts are set aside and it is hereby ordered that the respondent shall hand over the vacant possession of the premises in question to the appellants. I would however, allow the respondents for months' time for vacating the premises provided they continue paying the rent regularly.
23. ' The Appeal is thus allowed with costs.