Termination of sub-lease and derivative mortgage rights barred secured creditor's claim to office premises after liquidation disclaimer

A sub-demised office space burdened by unpaid rent and contractual charges was treated as onerous property, and the sub-lease had been validly terminated for default. Once the sub-lease ended, the company in liquidation retained no subsisting interest in the premises that could be asserted by the Official Liquidator or passed to the secured creditor. The bank's mortgage and SARFAESI enforcement could not create a better title than the underlying leasehold interest, so its rights remained derivative and ineffective after termination. Leave was therefore granted to disclaim the premises, and the applicant was entitled to vacant, peaceful and khas possession, while the monetary claim remained for determination in winding-up proceedings.

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Issues: Whether the Official Liquidator could disclaim the sub-demised office space as onerous property and whether the applicant was entitled to restoration of vacant possession despite the secured creditor's mortgage and SARFAESI action.

Analysis: The sub-demised premises was found to be burdened by unpaid rent and allied contractual charges, and the sub-lease had been validly terminated for default in payment. Once the sub-lease came to an end, the company in liquidation had no subsisting interest capable of being asserted by the Official Liquidator or transmitted to the secured creditor. The mortgage and enforcement steps taken by the bank could not confer a title superior to that of the sub-lessee, because the bank's rights were derivative of the borrower's leasehold interest. The principle that no one can convey a better title than he has was applied to hold that, after termination of the sub-lease, nothing survived in favour of the secured creditor in respect of the premises.

Conclusion: Leave was granted to the Official Liquidator to disclaim the sub-demised office space, and the applicant was held entitled to vacant, peaceful and khas possession of the premises. The monetary claim was not finally adjudicated and was left to the Official Liquidator in accordance with the winding-up proceedings.

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