The Supreme Court has reaffirmed that unauthorized subletting under rent control laws is established not by partnership arrangements but by the factual reality of exclusive possession by third parties, with the burden shifting to the tenant to prove lawful continuity. The judgment also strictly limits revisional jurisdiction, prohibiting High Courts from reappreciating evidence under the guise of reviewing legality.
Background & Facts
The Dispute
The dispute arose from a long-term lease of commercial premises in Chickpet, Bengaluru, originally granted to Sri M.V. Ramachandrasa (the landlord) under a registered lease deed dated 02.02.1983 for 55 years, with express permission to sub-lease. The landlord subsequently leased Shop No.1, Ground Floor, Maruthi Plaza, Block C, U.M. Lane, Chickpet, to M/s. Mahendra Watch Company, a partnership firm, through a registered lease deed dated 22.02.1985 (Document No. 3669/1985) for 53 years, expiring on 22.02.2038. Clause 19 of this lease deed explicitly prohibited subletting, assignment, or parting with possession without the landlord’s prior written consent.
Key Facts
- The original tenant firm, M/s. Mahendra Watch Company, had one partner, Respondent No. 4 (Rajesh Kumar), who signed the 1985 lease deed.
- The premises were occupied by the firm from 1985 onwards.
- Around the year 2000, Rajesh Kumar allegedly retired from the partnership.
- Respondent Nos. 2 and 3 (Ashish M. Jain and Atul M. Jain), sons of Mohanlal Jain, assumed control of the business and premises.
- No registered partnership deed was produced to evidence the retirement of Rajesh Kumar or the induction of Ashish and Atul as partners.
- The alleged reconstitution deed (Ex. R3) dated 01.07.2000 was unregistered and unproved.
- RW-1 (Mohanlal Jain) admitted during cross-examination that in 1985, there were five partners, yet only Rajesh Kumar signed the lease.
- Rent receipts continued to be issued in the name of the original firm, but no evidence showed that Rajesh Kumar retained any role in management, control, or physical presence.
- The landlord discovered the change in occupation and filed H.R.C. No. 63 of 2016 seeking eviction under Sections 27(b)(ii), 27(d)(i)(ii), and 27(p) of the Karnataka Rent Act, 1999.
Procedural History
- 22.02.1985: Registered lease deed executed between landlord and M/s. Mahendra Watch Company (Respondent No. 1), with Rajesh Kumar as sole signatory.
- 01.07.2000: Alleged reconstitution of partnership firm; no registered deed produced.
- 2016: Landlord files H.R.C. No. 63 of 2016 before the Court of Small Causes, Bengaluru, alleging unlawful subletting.
- 14.07.2017: Trial Court allows eviction petition, finding Respondent Nos. 2 and 3 to be strangers to the tenancy and in exclusive possession without consent.
- 23.05.2023: High Court of Karnataka allows House Rent Revision Petition No. 56 of 2017, setting aside the eviction order on grounds of alleged partnership reconstitution.
- 28.03.2023: Civil Appeal No. 4353 of 2026 filed in the Supreme Court by legal heirs of the deceased landlord.
- 10.04.2026: Supreme Court delivers judgment.
The Parties' Positions
Appellants (Legal Heirs of Landlord): Argued that Respondent Nos. 2 and 3 are strangers to the lease, have no privity of contract, and are in exclusive possession without consent. The alleged partnership reconstitution is a sham to circumvent the lease terms and rent control laws.
Respondents (M/s. Mahendra Watch Company): Contended that the business has always been carried on by partners, and change in partnership composition does not constitute subletting. They claim continuous possession since 1978, and that the 1985 lease conferred enduring rights including transferability among partners.
Relief Sought
The appellants sought restoration of the trial court’s eviction order dated 14.07.2017, directing Respondent Nos. 1 to 3 to vacate the premises and hand over vacant possession. They also sought costs and dismissal of the High Court’s revisional order.
The Legal Issue
The central questions were: (1) Whether the High Court exceeded its revisional jurisdiction under Section 46 of the Karnataka Rent Act, 1999 by reappreciating evidence and substituting factual findings of the trial court? (2) Whether the landlord discharged the burden of proving unlawful subletting by establishing exclusive possession of third parties? (3) Whether the reconstitution of a partnership firm, without proof of the original tenant’s continued legal possession, amounts to subletting under Sections 27(2)(b)(ii) and 27(2)(p) of the Act?
Arguments Presented
For the Appellant
The learned Senior Counsel submitted that the High Court’s interference was impermissible under Section 46, which confers supervisory, not appellate, jurisdiction. Reliance was placed on Hindustan Petroleum Corporation Ltd v. Dilbahar Singh and Rukmini Amma Saradamma v. Kallyani Sulochana, emphasizing that revisional courts cannot reappreciate evidence or substitute findings unless perverse or based on no evidence. The trial court’s findings were based on credible evidence: absence of a valid partnership deed, non-production of retirement documents, and admission by RW-1 that only one partner signed the lease. The landlord proved exclusive possession by strangers, triggering a presumption of subletting under Mahendra Saree Emporium (II) v. G.V. Srinivasa Murthy. The respondents failed to rebut this presumption.
For the Respondent
The respondents’ counsel argued that a partnership firm is not a separate legal entity, and change in partners does not amount to subletting so long as the business continues uninterrupted. Reliance was placed on Associated Hotels of India Ltd v. S.B. Sardar Ranjit Singh, Jagan Nath v. Chander Bhan, and Parvinder Singh v. Renu Gautam, asserting that legal possession remained with the firm, and the landlord was aware of the partnership change through continued rent payments. The eviction petition was an abuse of process, filed to exploit technicalities and suppress the existence of the 1985 lease.
The Court's Analysis
The Supreme Court began by examining the scope of revisional jurisdiction under Section 46 of the Karnataka Rent Act, 1999. It reiterated that revisional jurisdiction is not appellate jurisdiction and cannot be used to reappreciate evidence or substitute findings of fact. The Court cited Hindustan Petroleum Corporation Ltd v. Dilbahar Singh and Rukmini Amma Saradamma v. Kallyani Sulochana, holding that interference is permissible only if the trial court’s findings are perverse, based on no evidence, or suffer from manifest illegality. The High Court, by independently evaluating the credibility of RW-1, the unregistered reconstitution deed, and rent receipts, effectively acted as a first appellate court - an exercise the law expressly prohibits.
"The High Court was not right in re-appreciating the entire evidence both oral or documentary in the light of the Commissioner's report... the revisional court can come to a different conclusion but not on a re-appreciation of evidence; on the contrary, by confining itself to legality, regularity and propriety of the order impugned before it."
On the issue of subletting, the Court examined the settled jurisprudence on the distinction between partnership reconstitution and unlawful subletting. It affirmed that a partnership firm is a compendious name for its partners and not a separate legal entity. However, the critical test is whether the original tenant retains legal possession and control. The Court held that once exclusive possession of a third party is established, and the original tenant is absent, a presumption of subletting arises. The burden then shifts to the tenant to prove lawful continuity.
"The onus to prove sub-letting is on the landlord and if he establishes parting of possession in favour of a third party, the onus would shift to the tenant to explain."
In this case, the original tenant, Rajesh Kumar, was no longer present, and no credible evidence proved his continued involvement. The reconstitution deed was unregistered, unproved, and contradicted by the admission that only one partner signed the lease. The respondents failed to establish that the original tenant retained any legal control. The Court concluded that the arrangement was a camouflage to conceal unlawful transfer of possession, warranting the veil to be lifted under Parvinder Singh v. Renu Gautam.
The Court further held that the mere issuance of rent receipts in the name of the original firm does not confer legal status on third parties. Legal possession, not formalities of payment, is determinative. The respondents’ occupation was neither authorized nor traceable to the original tenancy, satisfying both ingredients of subletting under Section 27(2)(b)(ii) and unlawful occupation under Section 27(2)(p).
The Verdict
The Supreme Court allowed the appeal. The judgment and order dated 23.05.2023 of the High Court of Karnataka was set aside. The eviction order dated 14.07.2017 of the trial court was restored. Respondent Nos. 1 to 3 were directed to vacate the premises and hand over vacant possession to the appellants within three months from the date of the judgment. There shall be no order as to costs.
What This Means For Similar Cases
Revisional Jurisdiction Cannot Substitute Appellate Review
- Practitioners must challenge factual errors through proper appeals, not revision petitions.
- High Courts must confine revisional scrutiny to jurisdictional errors, perversity, or illegality - never reappreciation of evidence.
- Any order that substitutes factual findings without perversity is liable to be set aside by the Supreme Court.
Exclusive Possession Triggers Presumption of Subletting
- Landlords need not prove direct evidence of monetary consideration; exclusive possession by strangers suffices.
- Rent receipts in the tenant’s name do not rebut the presumption of subletting if the tenant is absent.
- Unregistered partnership deeds, without proof of continuity or control, will be treated as sham transactions.
Veil of Partnership Can Be Lifted
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Courts may disregard partnership formalities where the real purpose is to evade rent control laws.
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The test is not the existence of a partnership deed, but whether the original tenant retains legal possession and control.
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Cross-examination of witnesses and documentary inconsistencies are critical tools to expose disguised subletting.
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Practitioners representing landlords should focus on proving absence of original tenant and exclusive possession by strangers.
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Practitioners representing tenants must produce credible, registered documents proving continuity of legal possession.
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In all rent control matters, the burden of proof shifts decisively once exclusive possession by strangers is established.
