M.V. Ramachandrasa Since Deceased Vs Mahendra Watch Company Represented By Its Partners & Ors. (Supreme Court of India)
SC: Partnership Cannot Be Used to Mask Illegal Sub-Lease; Courts Will Lift the Veil
The Supreme Court has held that a partnership arrangement cannot be used as a device to conceal an unlawful transfer of possession of tenanted premises. While tenants are permitted to enter into partnerships, such arrangements must be genuine and should not result in parting with legal possession or control.
The Court clarified that where, in substance, the original tenant has relinquished control and third parties are in exclusive possession, the mere existence of a partnership deed will not protect the tenant. In such situations, courts are entitled to lift the veil of the partnership and examine the true nature of the transaction.
Emphasising substance over form, the Court observed that if the partnership is only a façade to disguise transfer of possession, it would amount to unlawful sub-letting. Consequently, such arrangements will attract eviction under rent control laws.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. This Civil Appeal is directed against the judgment and order dated 23.05.2023 passed by the High Court of Karnataka at Bengaluru1 in House Rent Revision Petition No. 56 of 2017, whereby the High Court allowed the revision petition preferred by Respondent Nos. 1 to 3 and set aside the order dated 14.07.2017 passed by the Chief Judge, Court of Small Causes, Bengaluru2 in H.R.C. No. 63 of 2016. By the said order, the trial Court had allowed the eviction petition and directed the respondents to vacate the schedule premises and hand over vacant possession to the appellant (since deceased), within a period of three months.
