Liquidation does not automatically end leasehold rights; unexpired lease assets stay with the Official Liquidator for creditors' benefit.

A company in liquidation retains corporate until dissolution, and its unexpired leasehold rights remain assets available for beneficial winding up unless the lease is lawfully determined or disclaimed. The Bombay HC held that mere winding up did not justify directing the Official Liquidator to hand back the leasehold open land to the lessor, particularly where the lease still had a substantial term and sale of the rights had already been permitted for creditors' benefit. It also upheld the lessor's claim for rent arrears, directing the Official Liquidator to pay the dues and continue monthly rent, while allowing a fresh valuation before any request to reduce the reserve price.

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Issues: (i) Whether the Official Liquidator could be directed to hand over the leasehold open land to the lessor during the pendency of winding up, and (ii) whether arrears of rent and related directions ought to be granted.

Issue (i): Whether the Official Liquidator could be directed to hand over the leasehold open land to the lessor during the pendency of winding up.

Analysis: The lease was for a long remaining term and had not been determined by the lessor. On winding up, the company does not cease to exist until dissolution, and the Official Liquidator steps into the shoes of the company and retains control over its assets under the Companies Act, 1956. The leasehold interest was treated as a valuable asset capable of being dealt with for the benefit of the liquidation. The Court distinguished authorities where the premises were found unnecessary for winding up or where the liquidator had conceded surrender. It held that the leasehold rights could not be returned merely because winding up had been ordered, particularly when sale of the leasehold rights had already been permitted and the asset was being pursued for creditors' benefit.

Conclusion: The prayer for delivery of possession to the lessor was rejected.

Issue (ii): Whether arrears of rent and related directions ought to be granted.

Analysis: The Official Liquidator accepted liability to clear the rent dues, and the Court found the claim for arrears justified. As the reserve price issue depended on a fresh valuation in view of passage of time, the Court directed the Official Liquidator to obtain a fresh valuation report before seeking any reduction of reserve price.

Conclusion: The Official Liquidator was directed to pay arrears of rent and continue monthly payment, and was given liberty to seek reduction of reserve price after fresh valuation.

Final Conclusion: The leasehold property was retained with the Official Liquidator for administration in winding up, but the lessor's monetary claim for rent was upheld and ancillary directions were issued for fresh valuation and possible reconsideration of reserve price.

Ratio Decidendi: A company in liquidation continues to retain its corporate existence until dissolution, and its unexpired leasehold rights remain assets available for beneficial winding up unless the lease is lawfully determined or disclaimed; mere winding up does not automatically require surrender of the leased property to the lessor.

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