2005 (3) TMI 486 - HC - Companies Law

Kolkata Port Trust entitled to lease rent in winding-up expenses; emphasizes priority and lease transfer obligations.

The court held that Kolkata Port Trust is entitled to lease rent as part of winding-up expenses, to be disbursed by the official liquidator from sale ... Custody of company’s property, Winding up - Costs of voluntary winding up Issues Involved:1. Entitlement of Kolkata Port Trust to lease rent as part of liquidation expenses.2. Entitlement of lessor or new purchaser to possession of leasehold land.Issue-wise Detailed Analysis:1. Entitlement of Kolkata Port Trust to Lease Rent as Part of Liquidation Expenses:The primary issue is whether Kolkata Port Trust is entitled to lease rent for the period during which the land was in the possession of the official liquidator, treating the claim as costs and expenses incurred in connection with the liquidation proceedings. The court noted that the company was ordered to be wound up on September 1, 2000, and the official liquidator took possession of the leased land on July 16, 2001. The lease was terminated by Kolkata Port Trust due to non-payment of rent, and the lessor sought to evict the company under the Public Premises (Eviction of Unauthorized Occupants) Act, 1971. However, the court had earlier held that retaining possession of the leased land was necessary for the liquidation process and that the lessor was entitled to rent during this period.The court reiterated that costs and expenses incurred in the winding-up process have priority over other debts. It emphasized that the rent payable by the official liquidator for the leasehold land must be construed as part of the winding-up expenses, as the possession of the leased land was crucial for the successful sale of the company's assets. The court directed that Kolkata Port Trust must prove the actual quantum of rent due, and the official liquidator should disburse the amount from the sale proceeds, treating it as part of the winding-up expenses.2. Entitlement of Lessor or New Purchaser to Possession of Leasehold Land:The second issue pertains to whether the lessor, Kolkata Port Trust, is entitled to reclaim possession of the leased land or if the new purchaser, M/s. Scrapt Traders, is entitled to a renewal or transfer of the lease. The court noted that the terms of the sale made it clear that the land was leasehold and that the purchaser would be responsible for negotiating the renewal or transfer of the lease with Kolkata Port Trust. The court rejected the purchaser's claim that the unexpired period of the lease was included in the sale, emphasizing that the sale terms clearly stated the purchaser's responsibility to negotiate the lease renewal or transfer.The court held that the official liquidator's act of handing over possession of the leased land to the purchaser was not legally effective, as it was not authorized by the court. Therefore, the official liquidator was directed to hand over legal possession of the leased land to Kolkata Port Trust. However, the court also recognized the lessor's duty to fairly consider the purchaser's request for lease renewal or transfer, leaving it open for the parties to negotiate mutually acceptable terms or for the purchaser to seek legal remedies.Conclusion:The court concluded that Kolkata Port Trust is entitled to lease rent as part of the winding-up expenses and directed the official liquidator to disburse the amount from the sale proceeds. The court also directed the official liquidator to hand over legal possession of the leased land to Kolkata Port Trust, while recognizing the lessor's duty to consider the purchaser's request for lease renewal or transfer. All applications were treated as closed in terms of these directions and observations.