1992 (2) TMI 271 - SC - Companies Law

Supreme Court ruling on sub-tenancy validity, landlord consent, and Bombay Rent Control Act protection.

The Supreme Court addressed the validity of the sub-tenancy agreement, the landlord's consent, and the protection under the Bombay Rent Control Act. It ... Whether the sub-tenancy is true? Whether it is valid in law? Whether the consent of the landlord is true and valid? Held that:- The directions made by the Division Bench were not really warranted at this stage. The said directions have the effect of dispossessing the appellant from the said premises at an interlocutory stage. The character of her possession has also been altered—she is now permitted to be in occupation of a portion of the flat as the agent of the liquidator. These directions, in our opinion, were not really warranted, at any rate, at this stage of the proceedings, when the rights of the appellant are yet to be adjudicated upon. One important circumstance which was not present before the Division Bench and which has been brought to our notice is the consent of the landlord to the sub-tenancy in her favour. Thus direct the appellant to furnish security in a sum of ₹ 5 lakhs by way of a bank guarantee to the satisfaction of the learned company judge of the Bombay High Court, within two months from today. The amount already deposited by the appellant in pursuance of the order under appeal shall continue to lie in court. The said amount and the security furnished by her in pursuance of this order shall be subject to the decision in the appellant's suit, now transferred to the Bombay High Court. Issues Involved:1. Validity of the sub-tenancy agreement.2. Consent of the landlord to the sub-tenancy.3. Protection under the Bombay Rent Control Act.4. Liquidator's authority over the tenancy rights.5. Conditions imposed by the Division Bench.6. Requirement of the premises by the official liquidator.7. Interim arrangement pending the suit.Detailed Analysis:1. Validity of the Sub-Tenancy Agreement:The appellant claimed to have entered into a sub-tenancy agreement with the company on July 15, 1979. The official liquidator and the Division Bench questioned the validity and authenticity of this agreement, suggesting it might be 'bogus and/or at any rate of extremely doubtful legal validity.' The Supreme Court noted that the board of directors had indeed passed a special resolution affirming the sub-tenancy agreement, establishing the appellant's plea of sub-tenancy prima facie.2. Consent of the Landlord to the Sub-Tenancy:The appellant asserted that the landlord had orally consented to the sub-tenancy. The Division Bench found this claim difficult to believe, given the prevailing conditions in Bombay. However, during the Supreme Court proceedings, counsel for the landlord-trust confirmed the landlord's oral consent to the sub-tenancy. This new information was considered for the limited purpose of the appeal.3. Protection under the Bombay Rent Control Act:The appellant argued that her protection under the Bombay Rent Control Act could not be ignored or undone merely because the company had gone into liquidation. The Supreme Court acknowledged this claim, noting that the appellant's protection under the Act could not be dismissed prima facie.4. Liquidator's Authority over the Tenancy Rights:The appellant contended that the tenancy interest the company had in the flat was not an asset of the company in liquidation and that the liquidator could not trade in this right. The Supreme Court noted that the rights of the company vis-a-vis its landlord and/or its tenants do not undergo any change merely because a company goes into liquidation and a liquidator is appointed.5. Conditions Imposed by the Division Bench:The Division Bench had imposed conditions, including the appellant paying a monthly compensation of Rs. 7,500 and depositing a security amount of Rs. 15,000. The Supreme Court found these directions unwarranted at this interlocutory stage, as they had the effect of dispossessing the appellant and altering the character of her possession. The Supreme Court directed the appellant to furnish security in a sum of Rs. 5 lakhs by way of a bank guarantee within two months, maintaining this as an interim arrangement pending the suit.6. Requirement of the Premises by the Official Liquidator:The official liquidator claimed that the premises were required for storing the company's records. The Supreme Court found this to be a relevant consideration, along with the proposal for the revival of the company by the Rashtriya Girni Kamgar Sangh. The landlord's application for possession was dismissed on these grounds, and the Supreme Court upheld this decision, noting that the reasons provided were relevant.7. Interim Arrangement Pending the Suit:The Supreme Court made it clear that the interim arrangement, including the security deposit, was without prejudice to the rights and contentions of the parties in the suit. The arrangement was subject to the decision in the appellant's suit, now transferred to the Bombay High Court. If the appellant failed to furnish the security within the prescribed time, the directions of the Division Bench would revive and come into operation.Conclusion:The Supreme Court's judgment addressed the validity of the sub-tenancy agreement, the landlord's consent, and the protection under the Bombay Rent Control Act. It found the conditions imposed by the Division Bench unwarranted at the interlocutory stage and directed an interim arrangement pending the suit. The requirement of the premises by the official liquidator for storing records was deemed relevant, and the landlord's application for possession was dismissed. The appeal was disposed of with specific directions for an interim arrangement, preserving the rights and contentions of the parties pending the suit.