Corporate Updates 31 May 2014

Where the transferor company is a tenant of premises and upon merger of transferor company with the transferee company, it shall amount to sub-letting unless permission of landlord of the premises is obtained – the eviction petition under the local rent laws on the ground of sub-letting shall be maintainable against such transferee company.

Facts of the case

The Hon’ble High Court of Kolkatta held in the matter of Smt Premlata Arya & Anr. Versus Ambalal Sarabhai Enterprises Ltd. & Ors. the Plaintiff are owners of an office space in Kolkata. The plaintiffs purchased the premises from Calcutta Credit Corporation Limited, which had let out the same to Standard Pharmaceuticals Limited (the original tenant). The rents were being paid by the original tenant to the present plaintiffs. The Plaintiffs, in or about November, 1988 noticed for the first time that the original tenant has been describing itself as a division of the Defendant No.1, (Ambalal Sarabhai Enterprises Limited). The plaintiffs upon enquiry could discover that pursuant to a scheme of amalgamation the said original tenant has merged with the Defendant No.1 and have thereafter being dissolved without winding up. The defendants had come to occupy the said premises on the basis of such order sanctioning the scheme of amalgamation.

As the same amounted to an assignment of the tenancy of the original tenant without consent of the landlord, the plaintiffs filed the instant suit seeking eviction of the defendants from the suit premises and for mesne profits from May, 1986 till possession.

The plaintiffs further contended that the Defendant No. 2, 3 and 4 (sister concerns of Defendant 1) are also having their offices and are carrying on their business on the said premises. The plaintiffs, at no point of time, had ever given any permission or consent to the continuous occupation of the said defendants or use of the said premises or any portion thereof. The plaintiffs had duly served on the said defendants notices calling upon them to hand over possession of the premises to the plaintiffs. The defendants and each of them however has refused to make over a vacant possession of the suit premises.

The defendants contended that the defendants are protected by the tenancy agreement entered into on 22nd January, 1973 and by the scheme of amalgamation made by and between Standard Pharmaceuticals Limited and the Defendant No.1. As per the scheme sanctioned by Hon’ble Court and the Gujarat High Court, all assets, liabilities, rights and obligations including the aforesaid tenancy vested in Defendant No.1. Standard Pharmaceuticals Limited duly communicated confirmation and/or sanction of the said scheme of amalgamation to the plaintiffs whereupon the plaintiffs by actual acceptance and/or acquiescence recognized the Defendant No.1 as a tenant in respect of the suit premises. Moreover, the plaintiffs had actual notice of the petition for confirmation of the said scheme of amalgamation through advertisements published in newspapers. In this regard, the plaintiffs actually and by their conduct became bound by the tenancy agreement.

The defendants also contended that by virtue of the Tenancy agreement the consent of landlord permitting the tenant to sublet the tenanted premises to its associate companies was implicit in the said clause and did not require any fresh or further consent in writing. In the alternative, Ambalal Sarabhai Limited was an associate of Standard Pharmaceuticals Limited and the plaintiffs have knowingly received rents from the transferee company.

It was argued that the order of amalgamation operated in rent because of wide publicity. The plaintiffs ought to have known or could have ascertained with reasonable diligence that the original tenant company has been amalgamated with the Defendant No. 1. The acceptance of such rent and retention of the money even after discovery of the fact that the original tenant stood dissolved are the most telling aspect of the matter which requires a serious consideration and clearly disproves the claim of the plaintiffs that the defendant is a trespasser.


Since the defendants are in wrongful occupation of the suit premises since 1986, the plaintiffs shall be entitled to mesne profits from May 1986 till recovery of possession.

The Court has appointed a member of the bar, as special officer to compute the mesne profits and submit the report before this Court. The learned counsel for defendants prayed for stay of operation of the judgment and decree. The same is considered and rejected.


In the event of amalgamation/merger of transferor company with the transferee, the transferee company is not entitled to continuation of tenancy unless the landlord of the premises has consented to such continuation of such tenancy and even if the landlord has accepted the rent for sometime, this will not make any difference. The landlord will be entitled to file suit for eviction on the ground of sub-letting.