Special lease covenants and liquidation sales: Kerala High Court held Collector sanction remained necessary before any transfer could proceed.

The Kerala Land Assignment Rules did not govern a special lease agreement because Rule 1A excludes Government lands held under special agreements, so the non-alienation restriction in Rule 15(2) did not apply. A proposed sale by an official liquidator in winding up was not treated as outside a contractual covenant against assignment or parting with possession without the Collector's written permission; court supervision did not make the transfer immune from that restriction. Because the sale had not yet been completed and prior sanction had not been sought or decided, the challenge was premature, and the liquidator was left to obtain Collector's sanction before any further court challenge.

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Issues: (i) Whether the Kerala Land Assignment Rules barred alienation of the leasehold interest under the special lease agreement. (ii) Whether a sale by the official liquidator in winding up was an involuntary sale outside the restrictive covenant requiring written permission of the Collector.

Issue (i): Whether the Kerala Land Assignment Rules barred alienation of the leasehold interest under the special lease agreement.

Analysis: Rule 15(2) of the Kerala Land Assignment Rules states that a lease or licence granted under the rules shall be heritable but not alienable. However, Rule 1A excludes lands within municipal and similar limits, and also excludes Government lands held under a special agreement with the Government. The lease in question was a special agreement and therefore fell outside the operation of the Land Assignment Rules.

Conclusion: The objection based on Rule 15(2) failed and the Rules did not apply to the lease.

Issue (ii): Whether a sale by the official liquidator in winding up was an involuntary sale outside the restrictive covenant requiring written permission of the Collector.

Analysis: The lease covenant prohibited assignment, sub-letting, or parting with possession without written permission of the Collector. The Court held that, in the context of winding up, the official liquidator acts on behalf of the company and the sale is not immune from the covenant merely because it is conducted under court supervision. The Court rejected the view that such a sale is involuntary and followed the Supreme Court's ruling that a transfer by the official liquidator can amount to a voluntary sale for the purpose of a covenant of this kind. As no sale had yet been completed, the liquidator could still seek the necessary sanction from the Collector.

Conclusion: The proposed sale was not excluded from the restrictive covenant, but the challenge was premature because sanction had not yet been sought or decided.

Final Conclusion: The appeal did not result in cancellation of the proposed sale, and the matter was left to be pursued first before the Collector for sanction, with liberty to return to the company court after that decision if necessary.

Ratio Decidendi: In a winding up, a sale by the official liquidator is not automatically treated as an involuntary sale free from a contractual prohibition against assignment, and where prior governmental sanction is contemplated the challenge to the proposed sale is premature until that sanction is sought and decided.

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