Young Men's Christian Association vs M/s. Mehadia Tourist Hostel Private Limited & Ors.

Rule. Rule made returnable forthwith. Heard finally with the consent of learned counsel appearing for the parties.

By the present petition, the petitioner seeks to challenge the validity, legality and propriety of the order dated 08/08/2025 passed in Civil Revision No.01/2024 by the Court of Special Judge, Special Court for Differently Able Person, Senior Citizens and Marginalised Sections of the Society, Nagpur and District Judge-9, Nagpur, whereby this said Civil Revision Application came to be partly allowed.

The facts, as emerging from the petition, are as under:

I have heard Mr. R.M. Sharma, learned counsel for the petitioner and Mr. B.B. Mehadia, learned counsel for the respondents.

The learned counsel for the petitioner submitted that the Revisional Court committed a serious error of law and jurisdiction in partly allowing the revision. It was contended that the trial Court had rightly directed respondent Nos.2 to 4 to be jointly and severally liable for the arrears of rent and had appropriately regulated the schedule of payment.

The learned counsel further submitted that respondent Nos.2 to 4 are closely related members of the same family and have direct and personal interest in the suit property. The respondent No. 1-company is merely a corporate entity created and utilized to avoid the legitimate claims of the petitioner and other creditors. The respondent Nos.2 to 4, claiming to be directors of the company, have retained possession of the suit property through the company without making payment of rent for several years.

It was further submitted that the respondents had failed to place on record the financial position, capital structure and other relevant financial documents of respondent No.1-company. The continued failure of the company to pay rent and subsequent arrears warranted an enquiry into the financial affairs of the company and the conduct of respondent Nos.2 to 4. The learned counsel, therefore, contended that the Revisional Court ought to have considered the circumstances justifying lifting of the corporate veil.

The learned counsel also submitted that the Revisional Court erred in foreclosing the petitioner's right to seek lifting of the corporate veil merely by accepting the alleged disassociation of respondent Nos.2 to 4 from the liability towards rent. It was contended that the conduct of the said respondents in retaining possession of the suit property and permitting the company to continue in default, despite their alleged position as directors, required consideration in the light of the principles governing fraudulent or improper use of corporate personality.

Lastly, the learned counsel submitted that the impugned judgment and order suffers from failure to properly appreciate the pleadings, material and applicable precedents governing the issue. The Revisional Court failed to exercise the jurisdiction vested in it in accordance with law and thereby committed an erroneous exercise of jurisdiction. It is, therefore, proper to quash and set aside the judgment and order dated 08.08.2025 passed by the trial Court be restored.

Per contra, learned counsel for the respondents rightly points out that the petition suffers from suppression of facts. By taking me through the reply filed by him, he points me out that the petitioner has not filed the entire copy of the Civil Revision No.01/2024. He submits that Ground Nos. XVIII and XIX of the said Civil Revision application were subsequently added which clearly show that there are no specific averments in the plaint that the Directors of the Company are liable for the liability incurred by the Company. He further points me out that having suppressed or intentionally not filing the entire copy of the Civil Revision would disentitle the petitioner from equitable relief.

I have considered the contentions canvassed by the learned counsels for the respective parties. As can be seen from the record, the order which is impugned in the present petition is passed on an application filed under Order XV-A of the Code of Civil Procedure (Maharashtra Amendment). The said order speaks about obligation of the defendant that is the tenant to deposit such amount as the Court may direct on account of arrears and thereafter continue to deposit in each succeeding month the rent or license fee. The said order also speaks about the consequences of any default and provides that if such a default is committed, the court may strike off the defence. It, therefore, necessarily follows that inquiry or order under the said provision is a summary inquiry since the parties have not led any evidence in support of their respective claims. The order of the trial Court and the judgment of the Revisional Court is to be tested in the backdrop of this fact.

As can be seen from the order of the trial Court, after negating each and every defence raised by the petitioner herein it has recorded a finding that the defendants jointly or severally should deposit the arrears of rent. The Revisional Court while deciding the revision has concurred with the findings of the trial Court on the factual aspects of it. However, in para 23 of the judgment of the Revisional Court the said Court has found favour with the respondents herein that the trial Court has not considered the fact that liability incurred by the Company cannot be fastened in personal capacity on the Directors of the Company. It has, therefore, went on to modify the said order and limiting the liability to the Company.

I find nothing wrong or perverse in the judgment of the Revisional Court. Interestingly enough, the tenant on whom the obligation is fastened has not chosen to challenge the said judgment of the Revisional Court. In other words, it can very well be said that the tenant i.e. respondent No.1 herein has accepted the said order.

A ground has been raised in petition that lifting of corporate veil would be required to see that in fact the Company as incorporated was done so only with an aim to avoid the liability. The ground in my considered opinion is misconceived. Since even as per the case laws cited by the petitioner herein reported in 2016 SCC Online Bom 10695 (Bhatia Industries and Infrastructure Ltd. Vs. Asian Natural Resources (India) Ltd. and another, this Court has categorically held that the concept of lifting of corporate veil can be resorted to even in execution proceedings.

Furthermore, only because the respondents Nos.2 and 4 herein are the members of the same family and related persons, the fact that the creation of the company is a sham and facade is a matter which would be decided at trial when the parties lead evidence in respect of their respective claims. The grounds raised in the revision more or less would be adjudicated by the Court after appreciation of the evidence of the parties. In addition to this there is nothing on record to show that only because the respondent No.1 Company has not paid any rent, it has turned insolvent. There is no question of foreclosing the rights of the present petitioner since the same can be done even at the stage of execution proceedings. In fact, the judgments cited by the learned counsel for the petitioner (referred supra) is against the contentions raised by him in the revision.

I, therefore, find no merit in the petition and the same is dismissed with no order as to costs. Rule discharged.