2021 (4) TMI 653 - HC - Companies Law

Court dismisses writ petition for lack of public law element, deeming dispute private and contractual. Seek alternative legal remedies.

The court dismissed the writ petition, ruling that it lacked merit and was not maintainable due to the absence of a public law element. The dispute was ... Recovery of money in disguise - inaction of State to recover - whether writ of mandamus will lie in resolving a private dispute, intending to recover money in disguise alleging State inaction, already lent out to the beneficiary/erstwhile lessees/proforma respondent nos. 1 and 2 tea garden companies, when affidavit of report of debt for and on behalf of creditors/writ petitioners had already been filed before the Official Liquidator pursuant to a winding up order? HELD THAT:- The execution of fresh lease was intended to be stalled pending realization of unpaid amount, given as loan amount to the erstwhile lessees in connection with the transaction already entered into between the parties - Without any controversy, writ petitioners are neither assignee, nor representative in interest of the erstwhile lessees being proforma respondent nos. 1 and 2. Surprisingly, though, the writ petitioners endeavoured to maintain an action proposing issuance of mandamus simply to frustrate execution of lease afresh upon respondent nos. 5-7, but no steps were taken before any court of law in civil jurisdiction to challenge the previous determination of lease of erstwhile lessees alleging illegalities, if there be any. Winding up order having passed against the proforma respondents, followed by submission of affidavit of report of debt before the Official Liquidator, in consequence of the proforma respondents/companies going into liquidation, the dues payable by the said companies (in liquidation) become a subject matter of Official Liquidator. Since, for and on behalf of the writ petitioners an affidavit of report of debt for creditors/writ petitioners has already been submitted before the Official Liquidator, the Court is of the view that there is hardly any scope to interpret the word “existing liability” of the erstwhile lessees/companies in its true context, contrary to the definition of Section 3 (10) (11) of the Insolvency and Bankruptcy Code, 2016, as proposed by either of the parties to this case, being an unnecessary academic exercise - The Court shares the same view, as proposed by the respondents, that it was a private dispute simply to recover money from the beneficiary tea garden company, already going into liquidation, and for such purpose, the grievance so raised by the writ petitioners, would not be sufficient enough to be considered responding to the proposed prayer for issuing mandamus for the purpose. Petition dismissed. Issues Involved:1. Non-fulfillment of conditions in Government notifications for execution of fresh lease deeds.2. Violation of previous court orders.3. Applicability of Section 334 of the Companies Act, 2013.4. Maintainability of writ of mandamus for a private dispute.5. Obligation of subsequent lessees to assume liabilities of erstwhile lessees.6. Public law element in contractual obligations.Issue-wise Detailed Analysis:1. Non-fulfillment of conditions in Government notifications for execution of fresh lease deeds:The petitioners contended that the State/respondent authorities did not adhere to the conditions imposed in their notifications dated 20th August 2009 and 3rd August 2018. These conditions required the subsequent lessees to clear all past liabilities, including outstanding bank loans, workers' dues, Provident Fund dues, and other statutory liabilities, before the execution of fresh lease deeds for the four tea gardens. The petitioners argued that the inaction of the State/respondent authorities in ensuring compliance with these conditions warranted the issuance of a writ of mandamus to prevent the execution of fresh lease deeds.2. Violation of previous court orders:The petitioners referred to an order dated 20th March 2017, which directed all parties to maintain the status quo regarding the ownership and possession of assets of the tea gardens until the disposal of the application. The petitioners claimed that the execution of fresh lease deeds violated this court order, necessitating judicial intervention.3. Applicability of Section 334 of the Companies Act, 2013:The petitioners argued that under Section 334 of the Companies Act, 2013, any disposition of property subsequent to a winding-up order by the Tribunal is void. They contended that the execution of fresh lease deeds for the tea gardens was illegal as it contravened this provision.4. Maintainability of writ of mandamus for a private dispute:The respondents argued that the dispute was private in nature, aimed at recovering money lent to the erstwhile lessees, and thus, a writ of mandamus was not maintainable. They contended that the petitioners, being unsecured creditors, should not seek mandamus for resolving a private financial dispute. The court agreed, noting that the writ application lacked a public law element and was primarily a private dispute over money recovery.5. Obligation of subsequent lessees to assume liabilities of erstwhile lessees:The respondents submitted that the subsequent lessees were only required to assume statutory liabilities of the tea gardens, as per the principle of Ejusdem generis. They argued that the notifications from the Government should be interpreted to restrict the assumption of liabilities to statutory ones only. The court found that the execution of fresh lease deeds could not be frustrated merely based on the contractual obligations of the erstwhile lessees towards the petitioners.6. Public law element in contractual obligations:The court emphasized that for a writ of mandamus to be issued, there must be a public law element involved. In this case, the court found no such element, as the dispute was purely contractual and financial, related to the recovery of money lent to the erstwhile lessees. The court concluded that the writ application was not maintainable in the absence of a public law element.Conclusion:The court dismissed the writ petition, stating that it lacked merit and was not maintainable in the current form. The court noted that the petitioners could pursue other legal remedies available under different provisions of law. The judgment emphasized that the dispute was private and contractual, with no public law element justifying the issuance of a writ of mandamus.