2002 (10) TMI 687 - HC - Companies Law

Court denies application to disclaim property leased to liquidated company, deeming it essential for winding-up process. Parties may apply under specific conditions.

The Court dismissed the application seeking orders for the Official Liquidator to disclaim interests in a property leased to a company in liquidation, as ... Winding up - Disclaimer of onerous property Issues:1. Entitlement to disclaimer of leased property by Official Liquidator.2. Maintainability of the application under section 535 of the Companies Act.3. Jurisdiction of the Company Court in eviction and re-entry claims.4. Consideration of factors for ordering disclaimer in the interest of the Company in liquidation.Entitlement to Disclaimer of Leased Property by Official Liquidator:The applicant, the Board of Trustees for the Port of Kolkata, filed an application seeking orders for the Official Liquidator to disclaim interests in a property leased to a company in liquidation. The leased land was utilized for manufacturing Marine Freight Containers, with a significant amount of rent arrears. The applicant claimed the right to re-enter the property due to default in rent payment and the winding up of the company. The Court considered the claim for disclaimer based on the property becoming onerous and prejudicial to the interests of the Company in liquidation. However, the Court found that the property, including factory buildings and moveable assets, was essential for the winding-up process, and ordering disclaimer at that stage would hinder the proceedings. Therefore, the Court held that the applicant was not entitled to the reliefs sought, and the application was dismissed.Maintainability of the Application under Section 535 of the Companies Act:A primary issue raised by a Secured Creditor was the maintainability of the application under section 535 of the Companies Act, which empowers the Official Liquidator to seek disclaimer of property. The Secured Creditor argued that only the Official Liquidator could file such an application. The Court analyzed the provisions of section 535 and relevant case laws, including a judgment by the Apex Court and the Calcutta High Court. It was concluded that while the Official Liquidator is primarily responsible for seeking disclaimer, interested or aggrieved parties could also file such applications in certain circumstances where the property is deemed onerous and burdensome.Jurisdiction of the Company Court in Eviction and Re-entry Claims:The Court discussed the jurisdiction of the Company Court in entertaining claims related to eviction and re-entry of leased property by the lessor. It was emphasized that under section 446(2) of the Companies Act, the Company Court has the authority to decide such claims involving the Company in liquidation. The Court noted the default in rent payment by the Company and the winding-up order, which triggered the lessor's right to re-enter the property. However, the Court highlighted that the interests of the Company in liquidation and Secured Creditors must be considered before ordering a disclaimer, ensuring it is beneficial for the winding-up process.Consideration of Factors for Ordering Disclaimer in the Interest of the Company in Liquidation:In determining whether to order a disclaimer, the Court considered various factors, including the necessity of the leased property for the successful conclusion of the liquidation proceedings. The Court observed that retaining the property under the Official Liquidator's possession was crucial for the winding-up process, despite the rent arrears owed to the lessor. It was emphasized that a disclaimer should only be ordered if it serves the interest of the Company in liquidation, and in this case, retaining the property was deemed necessary for the successful conclusion of the liquidation proceedings.This detailed analysis of the judgment highlights the key issues surrounding the entitlement to disclaimer of leased property, maintainability of the application under the Companies Act, jurisdiction of the Company Court, and the factors considered for ordering a disclaimer in the interest of the Company in liquidation.