Conversion of a family business into a company is not subletting absent third-party possession.

The premises had initially been let to a proprietorship concern associated with Y.D. Ahuja.

The business subsequently operated through a partnership comprising Ahuja and family members, and later through a private limited company in which Ahuja and his family members were shareholders and directors.

The Insurance Company alleged that the change in business form and the 1971 deed of assignment amounted to unauthorised subletting; the Estate Officer ordered eviction, and the City Civil Court upheld that order.

The tenants challenged both orders in this writ petition. The respondents also argued that the 2015 amendment to Section 5 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 (“P.P. Act”) applied retrospectively.

Whether the transition of the tenant’s business from proprietorship to partnership and then to a private limited company, involving only Ahuja and his family members, constituted subletting or parting with possession warranting eviction under the P.P. Act.

Whether the 2015 amendment to Section 5 of the P.P. Act applied retrospectively to the pending proceedings.

The P.P. Act prevails over rent-control legislation, and applies to tenancies existing before or created after its enactment where the premises fall within Section 2(e) and the occupation has become unauthorised.

Determination of a tenancy by notice under Section 106 of the Transfer of Property Act may render occupation unauthorised; the P.P. Act does not, however, dispense with the need for a legally sustainable basis for treating the occupation as unauthorised.

On subletting, the court applied the principles that there must be parting with possession in favour of a third party with exclusive possession and, under the rent-control authorities discussed, the relevant arrangement must also be without the landlord’s consent and for compensation or rent; mere induction of partners is not by itself subletting.

The court also relied on the principle that conversion of a family business into a company does not necessarily establish subletting where the original tenant retains control and no third party is introduced.

The court treated the 2015 amendment to Section 5 as prospective in the absence of express retrospective language.

The court found that the partnership and company involved Ahuja and his family members, with no third person introduced into the business or premises; it therefore concluded that the business restructuring did not establish parting with possession or subletting.

It also noted that the eviction application did not allege that the tenant had profited from parting with possession, and held the principles in Mahendra Watch and Madras Bangalore Transport applicable to the facts.

Although the P.P. Act overrides rent-control legislation, the court held that the cited authorities on the Act’s scope did not alter the merits of whether subletting had occurred in this case.

It rejected the respondents’ reliance on the 2015 amendment, holding that the amendment was not retrospective.

It made the Rule absolute and quashed the Estate Officer’s eviction order and the City Civil Court’s order upholding it.

The petitioners’ interim application for return of the bank guarantee and any other guarantees deposited with the Registry was allowed; the respondents’ request for a stay was rejected.