Court allows Official Liquidator to seize assets, declares tenancy claims fraudulent, orders prompt surrender.

The Court permitted the Official Liquidator to take physical possession of the Company's assets, including breaking open locks if necessary, to safeguard the interests of workers and creditors. It found the tenants' claims of tenancy rights fraudulent and collusive, declaring the obtained decrees null and void due to lack of jurisdiction under Section 446 of the Companies Act, 1956. The Court condemned the fraud and collusion between ex-directors and tenants, directing the tenants to surrender possession of properties promptly.

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Issues Involved:
1. Whether the Official Liquidator should be permitted to break open the lock and take physical possession of the assets of the Company.
2. Validity of the tenancy rights claimed by the tenants.
3. Allegations of fraud and collusion between the ex-directors of the Company and the tenants.
4. Jurisdiction of the Courts to pass decrees without obtaining leave under Section 446 of the Companies Act, 1956.
5. Whether the decrees obtained by the tenants are null and void.

Detailed Analysis:

1. Permission for the Official Liquidator to Take Possession:
The Official Liquidator sought permission to break open the lock and take physical possession of the Company’s assets at Bharat Diamond Bourse, Office Space No.8120, Bandra Kurla Complex, Mumbai, and other properties, with police assistance if necessary. The Court allowed this request, citing the need to protect the assets of the Company for the benefit of its workers and creditors.

2. Validity of Tenancy Rights:
The tenants claimed tenancy rights over several properties based on various agreements and decrees. However, the Court found these claims to be fraudulent and collusive. The tenants failed to produce valid agreements or rent receipts to substantiate their claims. The Court noted that the ex-directors of the Company were also partners or directors in the tenant firms, indicating a conflict of interest and collusion.

3. Fraud and Collusion:
The Court found substantial evidence of fraud and collusion between the ex-directors of the Company and the tenants. The ex-directors led evidence on behalf of the tenants in various suits, and the Company did not contest these suits, leading to favorable decrees for the tenants. The Court concluded that these actions were part of a scheme to obstruct the Official Liquidator from taking possession of the Company’s assets.

4. Jurisdiction and Section 446 of the Companies Act, 1956:
The Court held that the decrees obtained by the tenants were passed without jurisdiction as the Courts did not have the requisite leave under Section 446 of the Companies Act, 1956. The Court emphasized that any decree passed without such leave is a nullity and coram non judice. The tenants did not seek leave under Section 446, which would have allowed the Court to examine the reasons for prosecuting suits against the Company in liquidation.

5. Nullity of Decrees:
The Court declared the decrees obtained by the tenants as null and void, stating that they were obtained by fraud and collusion. The Court relied on precedents such as Forbes and Company v. Coromandel Garments Ltd. and S.P. Chengalvaraya Naidu v. Jagannath, which establish that decrees obtained by fraud are non-est in law and can be challenged in any court, even in collateral proceedings.

Conclusion:
The Court allowed the Official Liquidator's report, directing the tenants to hand over physical possession of the properties within one week and permitting the Official Liquidator to break open the lock and take necessary police assistance if required. The Court emphasized the need to protect the assets of the Company in liquidation for the benefit of its workers and creditors, and condemned the fraudulent actions of the ex-directors and tenants.

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