Delhi HC Upholds Eviction Order Against National Herald Publisher AJL

At the very outset, it has to be stated quite explicitly that in a major setback to Congress party, Congress chief Rahul Gandhi and his mother Sonia Gandhi, a Division Bench of the Delhi High Court comprising of Chief Justice Rajendra Menon and Justice V Kameswar Rao on February 28, 2019 in this landmark, laudable and latest case titled The Associated Journals Ltd & Anr v. Land & Development Office in LPA 10/2019 & CM Nos. 566/2019 & 649/2019 has clearly and convincingly upheld the eviction order passed against National Herald publisher - Associated Journals Limited to vacate ITO premises where Herald House is located. It must be noted that the eviction order under the Public Premises Act was passed by Centre and the Land and Development Office (LDO) stating that no press has been functioning in the premises for at least the past 10 years and it was being used only for commercial purposes in violation of the lease deed. It would be pertinent to mention here that the order was passed in the backdrop of majority of shares of AJL being transferred to the company Young India (YI), in which Congress chief Rahul Gandhi and his mother Sonia Gandhi are shareholders.

Before proceeding ahead, let us have a glimpse into the brief timeline of this high profile case involving the lease of Herald House which is the building which houses the Congress mouthpiece. It is as follows: -

Oct 30, 2018 - Land and Development Officer terminates the lease given to AJL for the building.

Nov 15, 2018 - The Delhi High Court asks the Centre to maintain status quo with regard to its eviction process.

Dec 21, 2018 - A single Judge Bench of the Delhi High Court dismisses appeal by AJL against the lease termination order.

Jan 6, 2019 - AJL challenges the single Judge judgment before a Division Bench of the Delhi High Court.

Feb 28, 2019 - The 2 Judge Bench of Delhi High Court upholds the Single Judge's decision.

Interestingly enough, while challenging the eviction order, AJL approached the High Court. The single Bench of Delhi High Court comprising of Justice Sunil Gaur had repelled the challenge in December 2018. The Bench took serious note of the fact that AJL had been taken over by Young Indian Company for all practical purposes. It said that, 'This Court is conscious of the fact that Young Indian Company is a charitable company, but modus operandi to acquire 99% of AJL's shares speaks volumes. The manner in which it has been done is also questionable.'

First and foremost, para 1 sets the ball rolling by stating that, 'Seeking exception to a judgment dated 21st December, 2018 passed in W.P. (C) No. 12133/2018 by the learned writ Court, this appeal is filed by the petitioner/appellant herein under Clause 10 of the Letters Patent Act read with Section 10 of the Delhi High Courts Act, 1966.'

What follows next is para 2 wherein it is illustrated that, 'The appellant No. 1, the Associated Journals Ltd (hereinafter referred to as 'AJL') is a company which was incorporated on 20th November, 1937 for the purpose of publication of newspapers in different languages, the main aim for the publications were to propagate the principles and ideologies of the Indian National Congress ('INC'). The appellant No. 2, Sh. Nalin Kumar Asthana is the Company Secretary and it is said that he had been authorized by the Board of Directors vide resolution dated 2nd April, 2018 to file this appeal.'

In retrospect, we then see that it is brought out in para 3 that, 'Facts as have come on record reveal that on 2nd August, 1962 an agreement for lease/memorandum of agreement was entered into between the President of India (hereinafter referred to as 'the lessor') and the appellant company herein (hereinafter referred to as 'the lessee') whereby the lessor agreed to demise the suit land for the purpose of construction on certain terms and conditions as is mentioned therein. Clause XIX of the agreement provide for forfeiture and re-enter upon the premises in case the lessee breaches or commits any default in performance of the agreement. However, Clause XX imposes certain restrictions on the lessor in exercising this right of forfeiture of re-entry inasmuch as the lessee is entitled to a notice in writing specifying the breach complained of and in case the breach can be of remedy, to do so. Facts further reveal that the premises in question was leased @ Rs 1,25,000/- per acre for a specific purpose, that is, construction of a 5 storeyed building to enable the appellant company to establish its press and office for publication of the newspaper. It is said that vide letter dated 19th February, 1964, the appellant company expressed its desire for subletting certain portion of the building which according to the appellant was in excess of their requirements for newspaper publication and, therefore, after paying on additional premium of Rs.4,46,536/- sanction for subletting was granted and a perpetual lease in this regard was also executed on 10th January, 1967. Various other terms and conditions were also incorporated which would be referred to as and when required in the subsequent parts of this judgment.'

Of course, para 4 then states that, 'It is further the case of the appellant that Clause III (7) of the perpetual lease dated 10th January, 1967 stipulate the manner in which different floors of the building were to be used and it was agreed to between the parties that the premises shall be used in the following manner:-

(i) Basement and anyone floor of the building shall be used for the purpose of housing the members and the first floor of the building for the press and offices of the lessee for the publication of the newspaper.

(ii) The remaining four floors of the building can be let out to other commercial concerns for housing their office accommodation but cannot be used for the purpose of hotels, cinemas and restaurants etc.'

While elaborating in detail, it is then narrated in para 5 that, 'It is said that the AJL, even though it was incorporated on 20th November, 1937 but in the year 2002 its Chairman-cum-Managing Director was one Sh. Motilal Vora who also happens to be the Treasurer of All India Congress Committee (hereinafter referred to as 'AICC'). Facts that have come on record further reveal that the AJL was an unlisted publishing company having 1057 shareholders as in the year 2010. The total land allotted to the company was 0.3365 acres and the same was situated on the Delhi-Mathura Road, bearing No. 5A, Bahadur Shah Zafar Marg, New Delhi. It is said that sometimes in the year 2009 and, thereafter in the year 2016 it came to the notice of the competent authority, particularly, the technical team in Land and Development Office that the premises in question was being used mainly for commercial purpose through subletting to various organizations and the premises was not being used for any press or newspaper publication activity. Accordingly, it is said that on 6th September, 2016 a letter was addressed to the appellant company notifying that the premises of the company would be inspected by the officers of the Department on 13th September, 2016. In pursuance to the aforesaid communication, inspection was carried out by the technical team on 13th September, 2016/26th September, 2016 and it is the case of the respondents that on inspection, the team did not find any press activity in the premises. The basement was lying vacant, ground floor and first floor were rented to Passport Office, i.e., Seva Kendra, second floor and third floor were used by Tata Consultancy Services and fourth floor by the appellant company. Annexure-P/9 at page 392 of the paper book is the notice of the inspection dated 6th September, 2016. Annexure-P/10 is the communication dated 9th September, 2016 made to the Land & Development Officer on behalf of the appellant company by Sh. Motilal Vora expressing his inability to be available at the time of inspection on 13th September, 2016 and, therefore, on 9th September, 2016 an intimation is sent by the department to the appellant with regard to inspection of the premises on 14th September, 2016. Further, records indicate that certain communications were made for production of certain documents, like certified copy of sanction plan, completion plan of the local bodies etc. and finally records indicate that inspections were carried out in the premises in question on 26th September, 2016 and a breach notice was issued on 10th October, 2016 pointing out certain breaches. In the meanwhile on 26th September, 2016 vide Annexure-P/12, Sh. Motilal ora is said to have made a communication to the departmental authorities in response to the notice issued on 15th September, 2016 wherein he communicated that the basement and fourth floor of the building are being used for press and offices of the lessee and he was pleased to inform that the appellant has taken steps to resume newspaper publication and with this objective in mind, a Editor-in-Chief has been appointed in August 2016 and preparations are in full swing to resume publication of the newspaper in the financial year 2016-17.'

It is then brought out in para 6 that, 'Be that as it may, after the breach notice was issued as indicated hereinabove on 10th October, 2016, the appellant is said to have replied to the same on 19th October, 2016 vide Annexure-P/14. In the communication, the breach notice were referred to and finally a request was made to consider the submissions made in the reply and grant sufficient and reasonable time to study the breaches so as to enable them to file a satisfactory reply.'

Furthermore, it is then stated in para 7 that, 'According to the appellant, after this nothing happened. The departmental authorities slept over the matter for a considerable period of time, that is, about 2 years and all of a sudden on 5th April, 2018 constituted a three-member Committee consisting of Sh. K.K. Acharya, Under Secretary (Vigilance), Ministry of Housing and Urban Affairs; Sh. G.P. Sarkar, Dy. Director, Directorate of Estates and Sh. Rajanish Kumar Jha, Dy. Land and Development Officer to confirm the status of the breach and to inspect the premises on 9th April, 2018 at 11 A.M. It is alleged that on 9th April, 2018, the Committee inspected the premises and in its inspection made the following notings:-

'The floor wise report is as under:-

(A) Basement: The basement was lying more or less vacant. Some scrap materials and an old printing machine, not in working condition, were found lying there. However, front side mezzanine in Basement is being used by Akash Gift Gallery in an area of 84 sq. ft. This comes under misuse category.
(B) Ground Floor: The floor is rented out to Passport Seva Kendra. Apart from this, unauthorised pucca construction used as panel room in rear in an area measuring 1010-03 sq. ft.
(C) First Floor: The floor is rented out to Passport Seva Kendra.
(D) Second and Third Floor: The floors are rented out in Tata Consultancy Services.
(E) Fourth Floor: The floor is being used by the lessee for its office.

Photographs taken at the premises are also enclosed.'

What's more, it is then pointed out in para 9 that, 'Be that as it may, it is the case of the appellant that in an arbitrary and illegal manner vide impugned order dated 30th October, 2018, the lease was determined and the primary considerations for doing so as is made out from the order dated 30th October, 2018 are:-

(a) no press or press related activity has been carried out from the premises for the last 10 years,
(b) misuse of land outside the primary purpose for which the lease was granted,
(c) 100% transfer of shares of AJL to another company, namely, Young India which violates Clause III(13).'

As a consequence, we then see that it is pointed out in para 10 that, 'Aggrieved by this order passed by the Land and Development Officer (hereinafter referred to as 'L&DO') on 30th October, 2018 the writ petition in question was filed and the learned writ Court having dismissed the same by the impugned order dated 21st December, 2018, this appeal now by the appellant challenging both the orders dated 30th October, 2018 passed by the L&DO and the order passed by the learned writ Court.'

Going ahead, para 11 then reveals that, 'Dr. Abhishek Manu Singhvi, the learned Senior Counsel along with Sh. Vivek Tankha, the learned Senior Counsel argued at length and pointed out that the entire action taken by the departmental authorities in passing the impugned order dated 30th October, 2018 and the consequential dismissal of writ petition is contrary to settled principles of law and is unsustainable and is liable to be interfered with.'

Moving on, it would be useful to note that para 46 crucially points out that, 'Before adverting to consider various questions as have been submitted before us based on the questions formulated by the learned Senior Counsel as are detailed hereinabove, we, at the very outset, deem it appropriate to address the objection raised by Dr. Singhvi to the effect that formal notices were not issued either by the writ court or by this Court and no counter affidavits have been filed by the respondents and the respondents have tried to bring on record various factual matrix without there being any counter affidavit on their part. We find that the aforesaid submission is devoid of merits and should not detain so long for the simple reason that most of the facts that have come on record are based on the show cause notices issued to the appellant and their replies to the same. These are material on record arising out of the proceedings held before the L&DO and even if they are not stated in the form of a counter affidavit, we can take judicial notice of the same as the appellants themselves have brought them on record in the voluminous paper book filed. As far as the assertion made with regard to the transfer of shares of AJL to Young India and the share holdings of Young India and various other issues connected thereto are concerned, they are based on certain facts stated in the show cause notice issued by the Income Tax authorities on 15th June, 2018 and even if show cause notice is ignored, they do form part of the facts stated by co-ordinate Bench of this Court while deciding three writ petitions decided on 10th September, 2018, that is W.P. (C) No. 8482/2018 and other connected matters which were filed by the shareholders of Young India while challenging the action taken by the Income tax authorities. There is no whisper or serious challenge to these factual aspects by the appellant. They do not say, even orally, that these facts stated and relied upon by the respondents are false, incorrect, fabricated, untrue etc. They only say that certain facts have been stated without filing a counter affidavit. If the facts so stated, cognizance of which have been taken by the writ Court, are based on materials available in proceedings held before the L&DO and by a co-ordinate Bench of this Court in a writ petition, we see no reason as to why we cannot take cognizance or judicial notice of these facts and proceed to consider them for deciding the lis in question, particularly, when there is no specific or categorical denial of them even orally before us at the time of hearing. Accordingly, we are not impressed by the submissions by Dr. Singhvi to say that as no counter affidavit has been filed, therefore, most of the facts stated by Sh. Tushar Mehta should not be taken into consideration.'

NO PRESS ACTIVITY

To put things in perspective, it is then unfolded in para 48 that, 'The first objection of the appellants were to the finding recorded passed on 22nd December, 2018 pertaining to there being no press activity in the premises in question, that is, finding in para-17 of the impugned order. The facts that have come on record clearly shows and it is an admitted position if we analyse the show cause notices issued to the appellants on 10th October, 2016 replied to the same on 19th November, 2016, the second show cause notice dated 5th April, 2018, the third show cause notice dated 18th June, 2018 and the fourth show cause notice dated 24th September, 2018 and the series of replies filed by the appellants on 19th November, 2016, 7th April, 2018, 16th July, 2018 and 9th October, 2018 along with the communication made by Sh. Motilal Vora on 26th September, 2018 available at page-406 of the paperbook that between the period from the year 2008 to 2016, the appellant themselves admitted that there was no publication of the newspaper from the premises in question or from any other place and it was only after the inspection of the premises was conducted for the first time on 26th September, 2016 that indication was made about commencement of newspaper publication for 2016-2017.'

More pertinently, it is then rightly disclosed in para 49 that, 'In this regard, we may take note of the communication made by Sh. Motilal Vohra on 26th September, 2016 at page-406 of the paperbook. In this communication reference is made to an inspection notice dated 15th September, 2016 and it indicates that one Sh. Ravi Dayal is authorized to be present as a representative of AJL at the time of inspection at 11 A.M. on 26th September, 2016. That apart, as requested in the notice issued, certified copies of the sanctioned plan and occupation certificates were also submitted with this letter. The letter further states that the basement and the fourth floor of the building are being used for press and offices of the lessee and surprisingly the letter further says 'I am pleased to inform you that the Associated Journals Ltd. Has taken steps to resume newspaper publication. Towards this objection an Editor-in-Chief was appointed in August, 2016' and the letter further says that preparations are in full swing to resume publication of the newspaper in the current financial year 2016-17. Referring to this letter, the learned Solicitor General had argued that this letter was written only for pre-empting the authorities so that they are not surprised if no printing activities are found in the premises. In fact, Sh. Tushar Mehta is right in contending that this was an attempt by the appellants and, in fact, an admission by them that no printing activity was being carried out in the premises at that point of time. That apart, when we go through the four show cause notices available on record issued on 10th October, 2016, 5th April, 2018, 18th June, 2018 and 24th September, 2018 and the reply filed thereto, we find that various breaches were pointed out in all these show cause notices and they were replied to by the appellant company and the cumulative admitted position that can be made out from the reading of these documents are as under.'

To be sure, what we then read in para 50 is this: 'When the premises was inspected on 26th September, 2016, no press activity was being carried out in the area. Press activity and publication of the newspaper was suspended right from the year 2008 and all the employees were granted VRS. After the communication dated 26th September, 2016 was made by Sh. Motilal Vohra digital publication of the English Versions of the newspaper National Herald commenced from 4th November, 2016.'

Be it noted, para 51 then envisages that, 'Digital version of Urdu edition Qaumi Awaz commenced on 12th August, 2017. Digital version of Navjivan, that is, Hindi version commenced on 28th August, 2017 and the print weekly newspaper, National Herald Sunday resumed publication from 24th September, 2017 and it is the case of the appellants that these newspapers were printed in a press at Noida. Finally the printing of Hindi weekly newspaper Navjivan commenced publication on 14th November, 2018 and the necessary license and authorization for the purpose of publication indicated hereinabove was granted by the Registrar of Newspapers for India on 21st November, 2017 available at page 581 is a certificate of registration issued by Sh. K Ganeshan, Registrar of Newspaper for India giving registration certificate for a newspaper titled 'National Herald Sunday'. Accordingly it is clear that publication of the newspapers commenced after a gap of eight years as is indicated hereinabove. If this is the factual position, it can very well be concluded that when the first inspection took place, admittedly there was no printing of press or publication activity and the digital versions in English commenced publication only on 14th November, 2016, that is, about one and half month after the inspection took place on 26th September, 2016. Even though in the breach notice dated 10th October, 2016, there is no mention of there being no press activity but the admitted position is that when this notice was issued on 10th October, 2016 after inspection on 26th September, 2016 and the admission of Sh. Vohra on 26th September, 2016 that there is no printing activity, three other show cause notice issued, that is, 24th September, 2018 before taking the impugned action there is a mention about no press activity being carried out in the premises when the first inspection was ordered on 26th September, 2016.'

As it turned out, para 52 then reveals that, 'Contention of Dr. Singhvi was that in the first show cause notice issued there is no breach with regard to printing activity. It was only in the fourth show cause notice that the breach was pointed out and, therefore, this breach being not a breach indicated in the show cause notice, action should not be taken on this ground treating it to be violation of a condition of the lease.'

It cannot be lost on us that it is then stated in para 53 that, 'If we go through the detailed order passed by the competent authority which was impugned in the writ petition dated 30th October, 2018, we find that the impugned action has been taken not based only on the show cause notice dated 10th June, 2016, the impugned action is taken based on four show cause notices issued, all the replies and documents submitted by the appellants and after taking note of the totality of the facts and circumstances that came on record based on a combined analysis and scrutiny of all the four show cause notices and their replies, the breach has been recorded. The breach had been continuing right from the year 2008 till commencement of the digital publication on 14th November, 2016 and, therefore, if action is taken by holding that there has been violation of the terms and conditions of the lease deed for a period of more than 8 years and that only to retain the building and to pre-empt the respondents from taking any action, the so-called digital publications and weekly publications were commenced after inspection conducted on 26th September, 2016 is taken note of, we have no hesitation in holding that the breach of there being no printing activity or paper publication for a long period is established and this would mean and comes within the purview of breach of the terms and conditions of the license. The principles of law canvassed by the learned Senior Counsel appearing for the appellant and laid down in the case of S. Shrikrishna Oil Mill vs. Radhakrishnan Ramchandra, (2002) 2 SCC 23 pertaining to tenancy law cannot be applied in a case like this where the lease of government properties is granted to an organization or an establishment to carry out a specific act or purpose and if for a long period of time, the said purpose is not carried out and when there is a breach which even though to some extent may have been rectified when the proceedings for breach were going on, in our considered view, cannot be a ground for holding that the breach has been rectified in full and, therefore, there cannot be determination. It is the case where admittedly printing activities and publication of the newspaper were not being carried out in the premises when the inspection took place initially on 26th September, 2016 and even when the second inspection took place on 9th April, 2018 what was found was that the basement was lying more or less vacant and the fourth floor was being used for lessee for its office. The appellants may be right in saying that on 9th April, 2018, the weekly both Hindi and English were being published from the office at Noida and the office was functional on the fourth floor but on the appellant's own showing both these newspapers, namely, weekly in Hindi and English commenced on 24th September, 2017 and 14th October, 2018 respectively and if finding there to be no press activity for a long period of 8 years a finding is recorded that there has been breach of the terms and conditions of the lease, we see no reason to hold that the finding recorded is not proper.'

It would be pertinent to mention here that it is then illustrated in para 54 that, 'The terms and conditions of the lease stipulated that the land shall be used by the appellant for the purpose of construction of a building for the bonafide purpose of their press and, thereafter, requests have been granted inasmuch as four floors could be used for commercial purpose for housing commercial offices except hotels, cinemas and restaurants but the basement and the 4th floor were to be used for press and office. Admittedly, if not for the entire period, for a long period of time, that is for 8 years there was no press activity and the premises was used only for commercial activity if after examining the totality of circumstances, the lease is determined on recording a conclusive finding to the effect that no press has been functioning in the said premises for 8 or 10 years and is being used only for commercial purpose which violates a clause of the lease agreement, we see no reason to hold that the findings recorded for determining the lease and approved by the learned writ Court is a perverse and incorrect finding. The fact of luck of printing press alleged and the finding recorded is a proper finding based on the facts and circumstances of the present case and merely because after the actions were initiated by inspection and issuance of show cause notice on 26th September, 2016 and 10th October, 2016 if some publication activity both in the form of digital or printing is carried out that would not debar or prevent the respondents from determining the lease finding the same to have been breached continuously at least for a period of 8 years and accordingly, we see no reason to uphold the first objection raised on various grounds as are discussed hereinabove.'

RE-ENTRY CLAUSE

Truth be told, para 55 then elucidates while making it amply clear that, 'As far as the contention of the appellant to the effect that once the defects having been rectified and, therefore, the appellants are entitled to the benefit of the re-entry is concerned, if we peruse the breach complained of, it would be seen that the action for determining the lease was undertaken on the basis of following allegations that have been made out on a cumulative reading of various breaches indicated in the four show causes notices. The alleged breaches are:

(a) misuse of land with reference to the basement being used by Aakash Gift Gallery,

(b) unauthorized construction on the ground floor and first floor,

(c) transfer of the lease unauthorizedly to a third entity, and

(d) no press or printing activity being functional in the area.

Except for contending that the paper publication has commenced and the breach with regard to printing activity has been rectified by publication of the newspaper in the form of a web edition and by printing in the Noida press, other breaches with regard to misuse of the land and unauthorized constructions having been taken place is not rectified and if the allegations of transfer of 100% shares of the appellant company to Young India has the effect of transfer of the lease as contemplated under Clause III(13) is accepted then the right for re-entry would not be available as these breach still continue to exist.'

REGARDING CIRCULATION

It is dwelt upon in para 56. But as it has not much significance, it is best to avoid it.

REGARDING TRANSFER OF SHARE/PROPERTY

Going forward, para 57 then enunciates that, 'The next issue which was vehemently canvassed before us on behalf of the appellant was with regard to the transfer of shareholding from AJL to Young India. It is the case of the appellant that mere transfer of shareholding cannot be a ground for holding that to be change of ownership or transfer of the lease. Placing reliance on the judgment of Bacha F. Gazdar (supra) detailed submissions were made by Dr. Singhvi to emphasise that a shareholder only acquires a right to participate in the profit of the company. He gets no interest in the profit of the company and even if the shareholders of the company do have some voice in administering the affairs of the company, but their interest is limited to sharing the profits of the company and the company, a juristic person, which is distinct from the shareholders still owns the property. It is argued that in the backdrop of this legal position even if some of the shares of the company have been transferred that would not mean that the ownership of the leased premises also get transferred to Young India Ltd. It was emphasized that the ownership still remains even on such transfer with AJL and the said transfer would not have any effect on the ownership or transfer of the leased premises. To consider this aspect of the matter, we are required to take note of the shareholding pattern of both the companies and the manner in which the transactions have taken place and further in case the 'lifting of the veil theory' is applied, what would be its effect with regard to the issue in question.'

More importantly, it is then observed in para 58 that, 'Indian National Congress sometimes referred to as AICC had advanced a loan of Rs 90 crores to AJL. The loan was advanced on the condition that the amount shall be utilized by AJL to write off their accumulated debts and to recommence publication of its newspaper. As per the facts recorded by the co-ordinate Bench of this Court in its decision rendered on 10th September, 2018 in W.P. (C) 8482/2018, the books of account of AJL from 1st April, 2010 to 31st March, 2011 showed an outstanding debt of Rs. 88,86,68,976/- and it ultimately became Rs. 90,21,68,980/- as on 15th December, 2010. On 13th August, 2010, an application was made for incorporation of a charitable non-profit company (a company under Section 25 of the Companies Act named Young India). The application was in Form 1A with the competent statutory authority and on 18th November, 2010 Young India was incorporated and on 18.11.2010 license was granted and ultimately on 23rd November, 2010 Young India was incorporated with Sh. Suman Dubey and Sh. Sam Pitroda as its founder Directors. This company had an authorized share capital of 5,000 shares of Rs. 100/- each valued at Rs. 5,00,000/- and the paid up share capital was 1100 shares of Rs. 100/- each valued at Rs. 1,10,000/- and the company at that point of time had two shareholders, (a) Shri Sam Pitroda - 550 shares valued at Rs. 100/- each and (b) Shri Suman Dubey - 5,000 shares valued at Rs. 100/- each. On 13th December, 2010, the first Managing Committee Meeting of Young India took place and Shri Rahul Gandhi was appointed as its Director, namely, a non-shareholder and Shri Motilal Vora and Shri Oscar Fernandes as ordinary members. Within five days thereafter, that is, on 18th December, 2010, by a deed of assignment the loan of Rs 90 crores and odd outstanding in the books of Indian National Congress as recoverable from Associated Law Journals for the period 2002 to 2011 was transferred to Young India. Three days thereafter, on 21st December, 2010, a Board Meeting of AJL called for an EGM which was subsequently held on 24th December, 2010 and on the said date a loan of Rs. 1 crore was received by Young India from another company M/s Dotex and thereafter on 28th December, 2010 i.e. within a week a formal deed of assignment was executed by AICC assigning the loan of Rs. 90 crores in favour of Young India. Immediately thereafter on 21st January, 2011, an EGM of Associated Law Journal was held approving fresh issue of 9.021 crores shares to Young India and on 22nd January, 2011 i.e. on the next day the second Managing Committee of Young India was held in which Smt. Sonia Gandhi, Mr. Motilal Vohra and Mr. Oscar Fernandes were appointed as Directors and the 550 shares of the existing shareholders of Young India - Suman Dubey and Sam Pitroda were transferred to Smt. Sonia Gandhi and Mr. Oscar Fernandes and on the same day fresh allotment of Young India shares were made in the following manner: (a) 1,900 shares having paid up value of Rs. 1,90,000/- to Shri Rahul Gandhi, (b) 1,350 shares with a paid up amount of Rs. 1,35,000/- in the name of Smt. Sonia Gandhi, (c) 600 shares with a paid up value of Rs. 60,000 in the name of Sh. Motilal Vohra and (d) 50 shares with a paid up value of Rs. 5,000 in the name of Oscar Fernandes and after issuance of PAN by the Income Tax Department a bank account was opened by Young India with Citibank on 14th February, 2011 and the cheque issued by M/s Dotex for Rs. 1 crore was deposited in the Young India Bank account on the said day and on 26th February, 2011 Young India issued a cheque of Rs. 50 lakhs to AICC as consideration for assignment of Rs. 90 crore debt payable by ALJ to AICC. On the same day, i.e., 26th February, 2011, ALJ allotted 9,02,16,899 equity shares to Young India in pursuance to the AGM Meeting decision held on 21st January, 2011 and the ALJ Board Meeting on 26th February, 2011 and thereafter Young India applied for exemption under Section 12-A on 29th March, 2011 and on 9th May, 2011 the Income Tax Authorities granted the exemption with effect from the F.Y. 2010-11.'

Continuing in the same vein, it is then brought out in para 59 that, 'Be that as it may, by the aforesaid transaction that had taken place Young India acquired beneficial interest on AJL's property which on the said date was valued at more than Rs 400 crores on payment of a sum of Rs 50 lakhs to AICC. This, according to the respondent, if viewed in the backdrop of the purpose of transferlease and the modus operandi adopted is nothing but a devise to transfer the property held on lease from the Government by AJL, Young India which became 99% or rather 100% shareholder of AJL.'

Simply put, para 60 then stipulates that, 'In the case of Bacha F. Guzdar (supra) relied upon by Dr. Singhvi, a Constitution Bench of the Supreme Court has taken note of certain judgments with regard to corporate identity and a legal position with regard to the rights to property of a company, a juristic person and the relationship of a shareholder with the company and its property, as canvassed by Dr. Singhvi and as observed by the Hon'ble Supreme Court the principle indicates that a shareholder acquires a right to participate in the profit of the company but he does not acquire any right or interest in the assets of the company. It has been held that by investing money in the purchase of shares the shareholder does not get any right to property of the company though he acquires a right in the profits if and when the company decides to divide it. Even though the shareholder of the company have the sole determining voice in administering the affairs of the company and are entitled to as provided in the Articles of Association to declare the dividends and distribute the profits of the company but their right individually or collectively is nothing more than participating in the profits of the company, it is held that the company is a juristic person and is distinct from the shareholders. In fact, it is the company which owns the property and not the shareholder. The judgment further goes to say that there is nothing in the Indian Law to warrant the assumption that the shareholder who by his share buys any interest in the property of the company which is a juristic person entirely different from the shareholder. This in fact is the law laid down by the Constitution Bench of the Supreme Court in the aforesaid case.'

Needless to say, it is then underscored in para 61 that, 'It was vehemently argued by Dr. Singhvi that once this is the accepted legal position that is culled out on a perusal of the law laid down by the Constitution Bench, then by no stretch of imagination can it be argued that on transfer of shares of AJL to Young India Ltd., there is transfer of ownership or lease or property as contemplated in clause 13(3) of the lease in question. By referring to the judgment in the case of Mossanto Manufacturers (supra) and the terms and conditions of the lease deed which prohibited transfer in the said case and by comparing it to clause XIII(3) of the lease deed in question, we were told that in the absence of there being any specific prohibition permitting transfer of ownership of shares or change in the Article of Memorandum, the finding recorded with regard to transfer of ownership of the property recorded by the learned writ Court and the competent authority is unsustainable. The principles laid down in judgment of the Supreme Court in M/s K.G. Electronics (supra) and by this Court in DDA v. Human Care Medical Charitable Trust were also relied upon to canvass this contention.'

To put it succinctly, the Bench then in para 62 minces no words in stating that, 'On a consideration of the argument as canvassed by Dr. Singhvi, at the first instance, the same looks very attractive and the findings recorded may look to be unsustainable and perverse, however, it is an equally settled principle of law that in public interest and for assessing the actual nature of a transaction or the modus operandi employed in carrying out a particular transaction, the theory of lifting of the corporate veil is permissible and a Court can always apply this doctrine to see as to what is the actual nature of transaction that has taken place, its purpose and then determine the question before it after evaluating the transaction or the modus operandi employed in the backdrop of public interest or interest of revenue to the State etc. The theory and doctrine of lifting of corporate veil had been considered by the Supreme Court in the case of Gotan Lime Stone (Supra) and in the said case, judgments in the case of Vodafone (supra) and Skipper Construction (supra) etc have been taken note of and in para 30, specific reference has been made to the Constitution Bench judgment in the case of Bacha F. Gazdar (supra). After referring to most of the judgments including the judgment in the case of Bacha F. Guzdar (supra) relied upon by Dr. Singhvi is referred to and finally the consideration to be made is culled out in para 19 of the judgment in the following manner:

'19. As already stated, the question for consideration is whether in the given fact situation the transfer of entire shareholding and change of all the Directors of a newly formed company to which lease rights were transferred by a declaration that it was mere change of form of partnership business without any transfer for consideration being involved can be taken as unauthorised transfer of lease which could be declared void.'

Not stopping here, the Bench then in para 65 makes the picture more clear by categorically and convincingly holding that, 'If we consider the transaction in the present case in the backdrop of the aforesaid principles laid down by the Hon'ble Supreme Court, we have no hesitation in holding that the purpose for which the doctrine of lifting of the veil is applied is nothing but a principle followed to ensure that a corporate character or personality is not misused as a device to conduct something which is improper and not permissible in law, fraudulent in nature and goes against public interest and is employed to evade obligations imposed in law. If that is the purpose for which the doctrine of lifting of the veil is to be employed and if we see the transaction that has taken place in the present case with regard to how the transfer of shares between AJL and Young India took place, we find that within a period of about three months, that is, between 23rd November, 2010 to 26th February, 2011, Young India was constituted. It took over the right to recover a loan of more than 90 Crores from All India Congress Committee for a consideration of Rs. 50 Lakhs, thereafter replaced the original shareholders of Young India by four new entities including Sh. Moti Lal Vohra, Chairman of AJL and Young India after acquiring 99% of shares in AJL, became the main shareholder with four of its shareholders acquiring the administrative right to administer property of more than 400 Crores. Even though Dr Singhvi had argued that there is nothing wrong in such a transaction and it is legally permissible, but if we take note of the principles and the doctrine for which the theory of lifting of the corporate veil has received legal recognition, we have no hesitation in holding that the entire transaction of transferring the shares of AJL to Young India was nothing but, as held by the learned writ Court, a clandestine and surreptitious transfer of the lucrative interest in the premises to Young India. In fact, the contention of Dr Singhvi has to be rejected and rightly so was rejected by the Single Judge even though without applying the principle of lifting of the corporate veil. In case the theory of lifting of the corporate veil, as discussed hereinabove, is applied and the transaction viewed by analyzing as to what was the purpose for such a transaction, the so called innocent or legal and permissible transaction as canvassed before us, in our considered view, is not so simple or straight forward as put before us, but it only indicates the dishonest and fraudulent design behind such a transaction as laid down in various judgments referred to not only in the case of Udyog (P) Ltd. (supra) but also in the case of Union Territory of Estate Officer, UT, Chandigarh vs. S.C. Information Technologies, (2016) 12 SCC 582, Skipper Construction (supra), wherein also the theory has been applied after considering the principle laid down in Solomon (supra) and in para 28, in the case of Skipper Construction (supra), the law has been crystallized in the following manner:

'28. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this Court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are merely cloaks behind which lurks Tejwant Singh and/or members of his family and that the device of incorporation was really a ploy adopted for committing illegalities and/or to defraud people'.'

It is a no-brainer that it is then concluded in para 66 that, 'Apart from the aforesaid judgments, there are various other judgments which have been brought to our notice wherein the said theory of lifting of the corporate veil has been approved and we have no hesitation in holding that the transfer in question, if analyzed in the backdrop of the principles as discussed hereinabove, we see no error in the findings recorded by the learned writ Court to hold that the transfer in question comes within the prohibited category under clause XIII(3) of the lease agreement.'

Finally and perhaps most importantly, let us now dwell on the concluding paras 70 and 71. Para 70 explicitly enunciates that, 'Even though during the course of hearing Dr. Singhvi had tried to distinguish each and every judgment relied upon by the respondents to say that on the facts of each case, the same is not applicable, however, we are of the considered view that the said contention cannot be accepted. There may be certain differences with regard to the facts of each case, but this Court is required to take note of the legal principle that has been laid down by the Hon'ble Supreme Court in various cases, evaluate the facts and then apply them. While hearing this appeal, which is an intra-court appeal under Section 10 of the Letters Patent against a judgment of the Single Judge in a proceeding held under Article 226 of the Constitution, this Court has to keep in mind the limitations for interference in exercise of its extraordinary jurisdiction under Article 226 of the Constitution. Power can be exercised in a given set of circumstances and cases where subordinate courts, statutory authorities or tribunals and officers act wholly without jurisdiction or in excess of jurisdiction or in violation of the principles of natural justice or proceed in an erroneous manner which is apparent from the face of the record resulting in omission, commission, error or excess which results in manifest injustice. Whatever be the extensive discretionary jurisdiction available to this Court, it cannot be converted into a jurisdiction akin to that of a Court of appeal, examine the correctness of an impugned decision, substitute the decision of the subordinate authority or court to that of its own and record a different finding. A reasonable finding recorded after grant of proper opportunity to all concerned which meets the requirement of law need not and should not be interfered with by this Court until and unless manifest injustice or violation of statutory enactment or well settled principles are writ large in the proceedings or order under challenge. If the case in hand is analyzed in the backdrop of the jurisdictional power available to this Court under Article 226 of the Constitution, we find that in this case the finding with regard to no press activity being carried out in the premises for about ten years, misuse of land and 100% transfer of share to another company are all subject matters of four notices issued to the petitioner. The petitioner submitted voluminous documents and replies to these notices which made allegations of unauthorized construction, unauthorized permission to Akash Gift Gallery, clandestine transfer for ulterior motive etc. and the petitioners had in fact admitted the position with regard to there being no press activity and admitted non-publication of the newspaper due to financial trouble for more than eight years. It was only when the breach proceedings took place that press was installed, licence obtained and publication commenced after 24th September, 2017. The appellant also do not deny the fact about there being unauthorized occupation by Akash Gift Gallery, pendency of eviction proceeding. If all these factors are taken note of and a decision is taken by the respondents to say that the dominant purpose for which the lease was granted has been violated and there has been misuse of the conditions of the lease, in the absence of mala fides or ulterior motive having been established, the writ court has rightly refused to interfere into the matter. We also see no reason to make any indulgence into a reasonable order passed by the writ court in the facts and circumstances of the present case.' Lastly, the Bench in para 71 concludes by saying that, 'Accordingly, finding no grounds being made out for making any indulgence into the matter, we dismiss the appeal.'

In a nutshell, it can be said with certitude that this is a big jolt to AJL which is publisher of Congress mouthpiece National Herald in which Sonia Gandhi along with Rahul Gandhi hold high stake! The Bench of Chief Justice Rajendra Menon and Justice VK Rao have upheld the single Judge's December order which had dismissed AJL's plea against the Centre's eviction order and had directed it to vacate in two weeks the Herald House in the ITO area in the heart of the capital! AJL had appealed against the single Judge's December 21, 2018 order after which eviction proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, were initiated but failed to get any relief. It had challenged the Centre's October 30, 2018 order ending its 56-year-old lease and asking it to vacate the premises on the ground that no printing or publishing activity was going on and it was being used only for commercial purposes! Now it is quite palpable that AJL will approach the Supreme Court which is the top court! We have to keep our fingers crossed till Supreme Court finally delivers its judgment on this and refrain from second guessing what will be the final outcome! Only time will tell which way the dice rolls!

 

Sanjeev Sirohi 
on 13 March 2019
Published in Others
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