1. ' By this common order I propose to dispose of Rent Appeals Nos.769 and 770 of 1998 as they arise out of identical orders, dated 29-9-1998, whereby two Rent Applications tiled by the appellant against the same respondent, on the ground of subletting in respect of two tenements in the same building were dismissed by the 7th Rent Controller, Karachi (South).
2. ' Briefly the relevant facts of the case are that the appellant, a body established under the Life Insurance (Nationalization) Order No,10 of 1972, claiming itself to be the owner and landlord of building known as State Life Insurance Building, No,2-A, Wallace Road, off I.I. Chundrigar Road, Karachi, constructed over plot of land bearing Survey No,6/RY-5, Railway Quarters, Karachi filed two rent applications under section 15 of the Sindh Rented Premises Ordinance, 1979, being R.As.
3. Nos.1577 and 1578 of 1994, stating therein that their predecessor-in-interest Premier Insurance Company of Pakistan Limited let out two tenements in this building to the respondent one at the 3rd floor admeasuring 815 sq. Feet, under lease agreement, dated 1-4-1980 at Rs,1,630 per month and other at the 4th floor admeasuring 423.50 sq. Feet, under lease agreement, dated 8-10-1973 at Rs,423.50 per month. (Tenement at the 3rd floor of the building is subject-matter of Rent Case No,1578 of 1994 and tenement at the 4th floor of the building is subject-matter of Rent Case No,1577 of 1994). In both the cases in their identical pleadings the appellant stated that the case premises were let out to the respondent No,1 in his personal name for carrying on his sole proprietary business but he handed over its possession to respondent which is a limited company and a separate legal entity distinct from respondent No,1, and thus, render himself liable for eviction on this ground.
4. ' In their joint and identical written statement filed by the respondents in both the cases they did not deny the relationship of landlord and tenant between the respondent No,1 and the appellant but denied the claim of the appellant that the possession of the case premises has been handed over by the respondent No,1 to the respondent No,2. The respondents further stated that though legally respondent No,2 is a separate and distinct entity from respondent No,1 but in fact respondent No,1 owns and controls, entirely the respondent No,2 as effectively respondent No,2 company belongs to the respondent No,1 being its Managing Director and therefore, he has not parted with the possession or sublet the case premises to the opponent No,2. In addition to this the respondent also stated that the appellant is estopped from alleging that the respondent No,1 handed over possession of the case premises to the respondent No,2 as in fact this position existed much before the acquisition of the case premises by the appellant from its predecessor-in- interest. The Respondents also challenged the maintainability of ejectment applications having been filed without proper authority of the Board of Directors of the appellant and that the case premises were exempted from the operation of the provisions of Sindh Rented Premises Ordinance, 1979 through a valid notification.
5. ' At the stage of evidence, in both cases the appellant filed affidavit-in-evidence of one Muhammad Khaliq s/o Muhammad Miskeen, Deputy Manager in the appellant's company who produced documents Exh.A/2 to Exh.A/4. This witness was separately cross-examined by the counsel for respondents in both the rent cases and thereafter the side of the appellant was closed.
6. From the side of respondents, respondent No,1 filed his affidavit-in-evidence and produced documents Exh.O/2 to Exh.0/11, he was cross-examined in both the cases on 4-3-1998 and the side of the respondents was also closed on the same day. The Rent Controller while deciding these rent cases framed following points for determination: "(1) Whether the opponent No,1 has sublet the case premises in question to the opponent No,2 without consent of the applicant?
(2) What should the decree be?"
7. ' On assessm ent of evidence of the parties and other material on record the Rent Controller answered point No,1 in negative and dismissed both the rent applications by its orders, dated 29- 9-1998, which have been challenged separately through these Rent Appeals.
8. ' When these cases came up before me for arguments both the learned counsel for the parties made their brief oral submissions and relied upon their written notes of arguments already filed by them in Court.
9. ' Mr. Mian Mushtaq Ahmed learned counsel for the appellant contended that neither in the pleadings or evidence respondents disputed the fact that respondent No,2 is a company incorporated under the Companies Ordinance and is a separate and distinct legal entity from respondent No,1 nor they disputed that the office of respondent No,2 is established and functioning in the case premises. In such circumstances, factum of parting with the possession and subletting of case premises by respondent No,1 in favour of respondent No,2 is clearly proved. He further contended that the plea of respondents that respondents Nos.1 and 2 are one and the same thing is totally misconceived and has no legal basis. In context to the plea of estoppel, and waiver raised by the respondent, learned counsel referred to clause 2(e) of both the lease agreements executed between the appellant and respondent No,1 and submitted that in view of this specific clause incorporated in the agreement the question of estoppel or waiver does not arise. He also contended that from the evidence available on case record there is nothing to show that at any time the appellant by their act or omission waived their right of seeking eviction of the respondents on the ground of subletting urged in these ejectment applications. To enforce his contentions learned counsel placed reliance on the following cases:
(1) Muhammad Subhan and another v. Mst. Bilquees Begum through legal heir and 3 others 1994 SCM R 1507(2).
(2) Manekje Mobed and another v. Shah Behr= and others PLD 1974 SC 351.
(3) Muhammad Saleh v. Muhammad Shafi 1982 SCM R 33.
(4) Unreported judgment, dated 26-4-1988 in the case of Roshan Ali Bheemje v. M/s. Stander Insurance Company Limited (Civil Appeal No,347-K of 1986).
10. ' In the case of Muhammad Subhan, considering the question or parting with the possession and subletting of rented premises due to conversion of sole proprietorship concern into a partnership firm it was observed that due to change in status, interest in the rented premises was created in favour of other partners who shall be deemed to be in possession as partners of the firm. Thus, the findings of two Courts below on the point of subletting were maintained.
11. ' In the case of Manek J. Mobed, examining the point of sublet the apex Court observed that if a person obtains leasehold rights in his own name and subsequently assigns them to a firm or to 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.
12. ' In the same case repelling the plea of estoppel the Honourable Court recorded its view as under:- -- "Lastly it was urged by Mr. A.K. Brohi that the plaintiff was estopped by conduct from questioning the status of defendant No,2 as a tenant inasmuch as he had accepted cheques for rent of the Paradise Cinema from defendant No,2. It was pointed out that cheques were signed by Jehangir J.
13. Mobed as Managing Director of the Paradise Theaters Limited and there were receipts in his hand acknowledging payment of rent.
14. ' There is no force in the contention. Neither defendant No,1 nor defendant No,2 served a notice on Mr. Bomban Abadan Irani that the latter had entered into possession as sub-tenant or assignee of leasehold rights. Formerly cheques for rent were issued by Mr. Jehangir J. Mobed under his signatures. Cheques for rent were now sent by him in his name with the description 'Managing Director, Paradise Theater Limited'. This addition by itself did not constitute notice of subletting to the landlord. Moreover, the relevant condition of tenancy was 'without the permission and consent of the landlord in writing'. It was idle on these facts to contend that by mere receipt of cheques signed by Jehangir, J. Mobed as Managing Director, Mr. Bomban Abadan Irani had waived the fulfilment of the condition that the tenant will not sublet the Paradise Theatre without the permission and consent in writing of the landlord. Nor was there any change of position on the part of the defendant No,1 or defendant No,2 by the receipt of cheques by Mr. Boman Abadan Irani drawn by Mr. Hehangir J. Mobed as Managing Director of defendant No,2. The doctrine of estoppel had, therefore, no application in the facts of the case."
15. ' In the case of Muhammad Saleh, while considering the question of waiver Honourable Supreme court observed that in order to establish waiver by conduct it must be shown firstly that the person entitled to the right had knowledge of breach thereof and secondly, that he had acquiesced or failed to act notwithstanding that knowledge. Mere failure to object or take action due to ignorance of the breach of his right cannot be said as waived by conduct. It was further observed that mere intention or allowing an opportunity to pass does not necessarily amount to waiver thus, if there is delay by the landlord in filing an ejectment case out of decency to the tenant or being hesitant in going to the Court or for any other reason, the tenant cannot be allowed to take up the plea that the landlord due to such inaction waived his right in that regard. Mere omission to enforce one's legal right strictly cannot give rise to an inference that such right has been waived.
16. ' In the unreported case of Roshan Ali, the Honourable Supreme Court recorded its views as under:- -- "After having heard the learned counsel for the parties in the light of the record before us we find that the following findings reached by the learned Judge in the High Court admit of no exception:-- 'It is an admitted position in the case that the appellant is tenant of respondent in his personal capacity. No doubt it has come in evidence that the appellant had long association with number of companies including Eastern Federal Union Insurance Co. Ltd.; but this association of appellant with the company did not entitle him to establish office of that company in the disputed premises without consent of respondent. The Eastern Federal Union Insurance Company is a limited company and by virtue of its incorporation has a separate legal entity. The opponent himself did not come in the witness-box to rebut the allegation of subletting but produced his private secretary in evidence who admitted in cross-examination that a branch office of Eastern Federal Union Insurance Co. Is functioning in the premises in dispute. He also admitted that his branch office was established in the year 1980. The respondent in his evidence produced telephone directories to show that until 1980 Eastern Federal Union Insurance Co. Had no office in the disputed premises. However, in the telephone directory of 1981 a branch office of the company was shown located in the premises in dispute with a telephone number of branch manager. The above evidence was quite sufficient to establish the allegation of subletting/parting with possession of the premises by the appellant to Eastern Federal Union Insurance Company."
17. ' In reply to the above, Mr. Waqar Muhamamd Khan Lodhi learned counsel for the respondents firstly contended that the case premises are in exclusive physical possession of respondent No,1, who is not only the managing director of respondent No,2 company but also its exclusive owner for all purposes, which fact is fully proved from oral as well as documentary evidence produced by the parties and, therefore, there is no parting with the possession of the case premises or subletting in favour of respondent No,2. He next contended that the fact that respondent No,1 is using the case premises for his own business in the name of respondent No,2 was acquiesced by the appellant from the start of tenancy and in the earlier cases for fixation of rent such grievance was not even urged, and in such circumstances the appellants are now estopped from agitating the ground of subletting for seeking eviction of the respondents from case premises. To fortify his submissions learned counsel placed reliance upon the following cases:--
(I) Nasir Mehmood v. Mustajabi Begum 1983 CLC 282.
(2) Muhammad Yousuf and 5 others v. Adam Ali and 4 others 1981 CLC 596.
(3) Motal Bai v. Abdul Aziz and others PLD 1968 Kar.
18. 635.
(4) Khuda Bux v. Syed Badrul Hasan PLD 1968 Kar.
19. 657.
20. ' In the first case of Nasir Mehmood it was held that mere fact that same persons other than tenant were controlling business in the rented premises does not mean that they were sub-tenants.
21. ' In the second case question of subletting was examined with reference to entering into afresh partnership and it was held that where the tenancy rights in the premises were kept reserved for the benefit of tenant it cannot amount to parting with possession of rented premises to other partners and thus, penal consequences on the ground of subletting were not attracted.
22. ' In the third case referred by the learned counsel for the respondents it was held that a partnership firm is not a legal person or distinct entity.
23. ' In the last case of Khuda Bux, in the context of determining the rights of partners it was held that mere use of premises by partnership firm would not make premises part of partnership property.
24. ' I have carefully considered oral submissions made by the learned counsel and also gone through the written notes of arguments available on Court file.
25. ' From the perusal of written objection filed by the respondent it is evident that the respondents on one hand have pleaded that the respondent No,1 is in exclusive possession of the rented premises and on the other hand in their pleadings they have not only admitted that business carried on in the premises is in the name of respondent Na.2 but in this context they have also raised the plea of estoppel against the appellant. Paragraphs 2(v), 2(viii), 2(x), 4(b) and 4(d) of the written objections are relevant in this regard. Same are reproduced as under:--- "(2)(v) That the opponent No,1 carried on business in the name same of the opponent No,2 long before the said premises were acquired by the applicant.
(viii) That the opponent No,1 has owned and controlled and still owns and controls the entire issued and subscribed capital of the opponent No,2. That effectively the opponent No,2 belongs to opponent No,1.
(x) It is not denied that in law, the opponent No,2 is a separate entity distinct from opponent No,1 but in facts and circumstances of the case the identity of opponent No,1 is and indistinguishable from the identity of opponent No,2.
26. 4(b) That the applicant is estopped from alleging that the opponent No,1 has handed over the premises to the opponent No,2. The same facts existed much before acquisition of the said premises by the applicant. That at the time of accepting the first payment of rent from the opponent No,1, the same state of affairs were in existence.
(d) That more than decade or thereabout has lapsed since the applicant became aware of the fact that the opponent No,1 was using the premises for its own business in the name of the opponent No,2. The applicant after lapse of such period has filed this application and on this ground alone the application is liable to be dismissed. The applicant has acquiesced in the right of the opponent No,1 to use the premises for his own company."
27. ' In their evidence too the respondents reiterated the same facts in verbatim on oath and also produced several documents which go to show that for all practical purposes office of respondent No,2 is established in the case premises.
28. ' In addition to this in the cross- examination of the appellant's witness Muhammad Akhaq all along the trend of his cross-examination was suggestive of the fact that respondents even did not dispute the fact that running business in the case premises was owned by respondent No,2 which is a limited company and admittedly a separate legal entity from respondent No, 1 .
29. 'On the basis of above discussed facts it is clear that even if the respondent No,1 is occupying the case premises then such possession, is in the capacity of managing director of respondent No,2 and not in his personal capacity and that the business which is presently being managed and looked after in the case premises also belongs to the said respondent No,2. Examining to the legal status of respondent No,2, it may be observed that there is no cavil to this position that a company incorporated under the Companies Act/Ordinance is a separate legal entity and the same cannot be considered or construed as a sole proprietorship concern of any individual as illegally held by the Rent Controller. This legal position is amplified from the following observations made in the case of Messrs Franksons & Co. v. Mian Muhammad Hussain (1983 CLC 1042):-- "According to law a company is a separate juristic person, distinct and different from its shareholders. It is not a mere alias for its shareholders nor merely an agent for them. Any individual shareholder cannot indemnify the company against debts which it incurred except to the extent of his share in the capital. His liability is limited to that extent and he can only be called upon to contribute in the event of a winding up of the company to the extent of his own share."
30. "The contention of the learned counsel for the respondent that since a shareholder has close identity with the interest of the company and their interests are interlinked with each other, therefore, irrespective of the fact that a company is a separate juristic person, interest of its shareholders cannot be separated from that, has no substance."
31. ' In view of this established factual position now the only point for consideration before me is that whether in such circumstances, possession of respondent No, 1 over the case premises in the capacity of managing director of respondent No,2, could be considered as subletting in favour of respondent No,2 or not. This legal aspect of the matter has been discussed and examined in several reported cases some of which have already been referred above. The dictum laid down in the case of Manek J. Mobed (PLD 1974 SC 315) and Roshan Ali Bhimjee (supra), on all fours is applicable to the instant case. Thus, the appellant has succeeded to prove that the respondent No,1 sublet both the case premises to the respondent No,2.
32. ' Reverting to the question of waiver/estoppel, raised by the respondents it will be useful to reproduce here clause 2(e) of the lease agreement which reads as under:--- "Not to assign or part with possession or sublet the premises or any part thereof to any person or persons without a previous permission in writing to be obtained from the lessor, who shall be entitled to refuse such permission on any ground whatsoever without assigning any reason."
33. 'It may be observed that in view of - specific language of clause 2(e) of both the agreements of lease executed between the appellant's predecessor and the respondent No,1 and further considering the fact that the appellant is a body corporate, whose business and other affairs are managed by its Board of Directors and not by individuals, the plea of estoppel/waiver raised by respondents is wholly misconceived. In addition to this on facts also the respondents have failed to show that at any stage before filing of ejectment cases against the respondents the appellant acknowledged such subletting by respondent No,1 in favour of respondent No,2 or that due to their acts or omissions they waived such right for seeking eviction of the respondents on that account.
34. The principle laid down in the case of Manak J. Mobid (PLD 1974 SC 341) and Muhammad Saleh (1982 SCR 33) is fully applicable to the facts of instant cases and thus, the plea of estoppel and waiver raised by the respondents on facts also has no force.
35. ' For the foregoing reasons both these appeals are allowed, consequently the impugned orders, dated 29-9-1998 passed in Rent Cases Nos.1577 and 1578 of 1994 are set aside and both these Rent Applications are allowed. The respondents are, however, allowed 60 days' time to vacate the case premises.