TaxTMI 
TaxTMI 
TaxTMI 
2002 (7) TMI 583
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....s a brief recapitulation of historical facts is necessary. 3. On 7-10-1994 this Court (Coram : Mr. Justice M.S. Parikh), had passed a common order in Company Application No. 47 of 1993 with Company Application No. 48 of 1993 with Company Application No. 49 of 1993 in Company Petition No. 72 of 1991. The said applications filed by the heirs and legal representatives of deceased lessor of respective properties being land as particularly described in the applications were for directions to return the land to the said applicants. The Court came to the conclusion that the lease deeds in question were non-determinable, fully transferable and assignable permanent lease deeds, and hence, even if a notice to determine such lease had been given such notice was not valid on correct construction of the lease deed in question. As a consequence, the Court held that the company in liquidation represented by the official liquidator was not a statutory tenant; accordingly, it was not possible to direct the Official Liquidator to hand over possession of the lands in question. However, the Court directed payment of rent of the leasehold lands from the date of winding up directly to the lessors. 4.....
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....counsel for the lessors made a proposal as stated in para 4 of the order dated 14-2-2002, the learned counsel appearing for various secured creditors sought time to seek instructions from their respective clients as this was a policy matter and accordingly, the following order was made : "6. In view of the above, the hearing of this group of matters is adjourned to 5th March, 2002 subject to the following :- (i )Those of the applicants who are agreeable to give up all their rights in the lands in question including their freehold rights, if any, shall submit a without prejudice proposal through their respective advocates to the respective advocates for the secured creditors and to the advocate for the Textile Labour Association with a copy endorsed to the Official Liquidator. This shall be done within one week from today i.e. by 21-2-2002. Where the State of Gujarat and/or ONGC are also parties to any litigation, their advocates shall also be served with a copy of the proposal. (ii)Upon receiving such proposals, the advocates for the secured creditors, the Textile Labour Association, State Government and ONGC shall forward such proposals to their respective clients and get the ....
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.... of the land be returned to the lessors. (c)The Official Liquidator is only a statutory tenant which would not entitle him to sell the leasehold interest of the company and, thus, the Liquidator remaining in possession would be required to keep on paying the rent which would be onerous, and hence, the Liquidator be directed to disclaim the property and handover the possession to the lessor applicants. (d)That till the rent was being regularly paid there was no right of eviction available with the lessors but at the same time the lessee had only a limited right of sub-letting and permissive user and did not have any right of assignment. That the lessee company could not have created any charge over the demised premises as the lease deed or rent note did not permit such course of action. (e)That the leasehold interest was not a property which could be treated as an asset of the company and, hence, could not be dealt with. In other words, it was a mere right of possession and nothing more than that. (f)That the nature of tenancy could be permanent/in perpetuity or for a life-time or for a fixed period, but in no case could such a tenancy survive the company. That, once an order of....
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....in the other two enactments. In this connection, it was also contended that a lessee/tenant was not entitled to double protection, i.e., under the Transfer of Property Act and the Rent Act, and, thus, also only provisions of the Rent Act would apply. (n)That even if the Court directed payment of arrears of rent, a statutory tenancy which had come into being by operation of law could not be converted back into contractual tenancy and the lessor was entitled to forfeit lease and the Court could not relieve the lessee from such forfeiture. (o)That the lessors had reversionary interest and the same was never lost. That the rights conferred on the lessee company could not be exercised by the Official Liquidator as the Liquidator would only come into the picture when an order of winding up was made. Thus, the reversionary interest which remained with the lessor could not be snatched away by the Official Liquidator. (p)In some of the matters upon reading of the lease deeds it was submitted that the terms of the deed provided an option to the lessor to terminate lease and, hence, it was a pointer to show that the lease was not permanent in nature. (q)That there was no privity of contra....
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.... (g)That the order of winding up and order of dissolution are two distinct situations/stages and the order of winding up cannot be treated as being equivalent to an order of dissolution. (h)That the right to disclaim an onerous property is available with the Official Liquidator and it is not open to the lessors to seek direction against the Official Liquidator to disclaim the property. (i)That section 535(1) of the Companies Act, 1956 ('the Act') specifies four types of properties and if the property does not fall within any of the four clauses, the Official Liquidator has no right to disclaim. That the leasehold rights would not fall within sub-clause (b) or sub-clause (d) of section 535(1). That apparently, though clause (a) might seem to apply, it will be necessary for the lessor to show that the land in question is burdened with onerous covenant. (j)That liability to pay rent is not per se onerous covenant; once the financial institutions/mortgagees undertake such liability the same would cease to operate as being onerous, even if it is presumed to be onerous. (k)Unexpired period of contractual lease is transferable under section 108(j) of the T.P. Act in absence of contrac....
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....other laws as contented by the lessors. 9. Mr. R.M. Desai, appearing on behalf of the Official Liquidator contended that the lease deed had been entered into at a given point of time and for deciding whether the lessors are entitled to resume, the terms of a particular deed will have to be read and interpreted; that it was now settled rule of construction that deed as a whole had to be read for this purpose. Further more, it was submitted that the intention of the lessor at the time when the deed was entered into shall have to be taken into consideration while appreciating the contentions raised on behalf of the legal heirs :- (a)That as directed by the Division Bench of this Court, the applicants will have to establish not only that they are legal heirs of the lessor but also that there are no other heirs or, the other existing heirs have no interest in the property in question. (b)That the lessors and/or their heirs/representatives cannot be heard to challenge joining of the mortgagees, i.e., financial institutions as party respondents, because the Official Liquidator was merely abiding by the direction given by the Division Bench of this Court. (c)That as could be seen from ....
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....lessors deserve to be rejected. Thus, the interest of the lessors would stand protected and even if the leasehold rights will be sold in future, the purchaser of such leasehold rights will be bound by the terms and conditions of the lease deed. The lessors are not entitled to possession under the provisions of either T.P. Act or the Rent Act or the Companies Act and the leasehold rights being the assets of the company such rights could be sold as laid down in various decisions. 11. Some of the learned advocates appearing on behalf of the lessor-applicants raised a preliminary contention to the effect that, though as directed by the Court, various secured creditors and the Textile Labour Association have been joined as party respondents, as the so called secured creditors have not placed any details about any charge created in their favour by the lessees, such secured creditors should not be heard. That, alternatively, even if they are to be heard, they should be directed to place on record the details regarding the charge created in their favour which would enable the applicants to file their response. This contention requires to be stated to be rejected. This objection could have....
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....seized with winding up proceeding was required to be transferred and disposed of by the Court winding up the company regardless of any other law for the time being in force. Sub-section (4) of section 446 is not relevant for the present purpose. It is pertinent to note that the important words in sub-section (3) of section 446 are: 'notwithstanding anything contained in any other law for the time being in force'. In context of these provisions it will become necessary to deal with the controversy raised in this group of petitions. 14. Section 529 vide proviso under clause (c) of sub-section (1) stipulates that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen. Therefore, moment the secured creditors come into picture in winding up proceedings, the workmen will follow suit as provided in proviso to section 529(1) clause (c). Section 529A grants a preferential status to workmen's dues. Thus, even these provisions will have to be borne in mind while deciding controversy at hand. 15. Section 535 deals with disclaimer of onerous property in the case of the company which is being wound up. Sub-section (1) of section 53....
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....erstood and read in the context in which the same have been rendered. The Supreme Court has time and again laid down the guidelines for reading and applying its own decision. (a) In the case of Municipal Committee v. Hazara Singh 1975 (1) SCC 794 the Supreme Court dealing with the matter of the provisions of the Food Adulteration Act approved the approach of the Kerala High Court in the following terms :- "Judicial propriety, dignity and decorum, demand that being the highest judicial tribunal in the country even obiter dictum of the Supreme Court should be accepted as binding. Declaration of law by that Court even if it be only by the way has to be respected. But all that does not mean that every statement contained in a judgment of that Court would be attracted by article 141, Statements on matters other than law have no binding force. Several decisions of the Supreme Court are on facts and that Court itself has pointed out in Gurcharan Singh v. State of Punjab 1972 FAC 549 and Prakash Chandra Pathak v. State of Uttar Pradesh AIR 1960 SC 195 that as on facts no two cases could be similar, its own decisions which were essentially on questions of fact could not be relied upon as ....
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....ple underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An 'obiter dictum' as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a bind effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (See AIR 1970 SC 1002 and AIR 1973 SC 794). When Supreme Court decides a principle it would b....
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....al land in India and Gold Bonds and other bonds. Interest in immovable property would, therefore, be property and hence a capital asset..." (p. 12) 20.1 In the case of Shree Chamundi Mopeds Ltd. v. Church of South Indian Trust Association [1992] 3 SCC 1, the Apex Court laid down that leasehold interest of the lessee in the premises leased out to him is a property which can be transferred and can also be attached and sold by way of execution in satisfaction of decree against lessee. In that sense it can be said that the leasehold interest of a company is its property. However, the Court also carved out exception by stating that leasehold interest of the appellant company being a statutory tenancy in the premises leased out, cannot be said to be a property for the purpose of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Apex Court came to this conclusion by referring to the preamble of the SICA while interpreting the provisions of section 22(1) by taking into consideration the purpose for the enactment of the said Act. 21. It is settled law that one of the modes of termination of tenancy is forfeiture and the same is provided in section 111(g), ....
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....tisfied, the tenant would yet be entitled to resist the claim of landlord for possession of the premises, if otherwise entitled to de hors the provisions of the Rent Act. A tenant needs no protection against eviction by the landlord so long as he has necessary protection under the terms of the contract entered into with the landlord. A tenant's right to hold over after the termination of the contractual tenancy is different from the right to protection during the contractual tenancy and the two rights must be kept distinct from each other. In case of the former right provisions of the Rent Act come into play, while in case of the later right, ordinary law governing the rights of the tenant and landlord would become applicable. 23. It is settled law that the period of a subsisting lease cannot be curtailed in absence of a forfeiture clause in the lease deed. The contractual tenancy would, thus, subsist as governed by provisions of the T.P. Act and there cannot be any eviction from such tenancy. 24. At a given point of time a view prevailed that the statutory tenancy was a personal right to remain in occupation after the contractual tenancy had been determined and there was no righ....
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....rmination of the contractual tenancy." 27. Another position in law which is well-settled is that merely because company goes in liquidation and liquidator is appointed, the rights of the company vis-a-vis its landlord do not undergo any change and they continue to be governed by subsisting contract. 28. It was contended on behalf of the landlords that where the land was let out for a stated purpose though without fixed period the presumption was that it was intended to create a tenancy for the life-time, i.e., life-time of the company and could not be treated to be a permanent tenancy. In this connection, suffice it to state that the forms in which the tenancy rights are created are not uniform and hence the nature of the tenancy must be determined by construing a document as a whole; while construing the documents of such contracts the court must look at the substance of the matter and decide what the parties really intended. 29. During the course of hearing some specimen copies of lease deeds were read out and relying upon one of the terms wherein it was stipulated that the lessee was entitled to give back the possession if and when the lessee chose to do so, it was contended ....
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....he company in liquidation is for the purpose of implementation of the order and under sanction of the Court. In case the Court is not empowered to deal with an asset like leasehold interest of the company in liquidation it may, in a given situation, either give rise to or encourage malpractice by dishonest persons. Hard facts and realities of life have to be taken note of by the Court; normally the properties which are leased out to the company are owned by either Directors or their relations or persons who are substantially amenable to directions of one or more Directors of the company in liquidation. Thus, on the one hand by permitting winding up of the company and on the other hand relieving company of valuable assets by seeking possession thereof, such Directors or other persons would take advantage of their own defaults like mismanagement or misappropriation of the properties of the company in liquidation. Similar is the view expressed by the Calcutta High Court in Kaliash Financiers (Calcutta) (P.) Ltd. 1982 (1) CLJ 100. 32. This decision came to be followed and applied by the Bombay High Court in the case of Vaz Forwarding Ltd. v. State Bank of India 85 Comp. Cas 603. The B....
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....vailable and it was not the case of the Liquidator that the lease was of a long duration. Upon an order of winding up having been made the Liquidator who was in possession of the premises did not need the premises for carrying on winding up activities nor was the premise required for the business of the company. The learned company Judge therefore directed the Liquidator to give the premises to a third party under a caretaker agreement. It was this action of the company Court which was challenged before the Supreme Court. Therefore, the observations made by the Apex Court directing surrendering of possession to the landlord will have to be understood in that context. In the cases at hand the facts show that the lease deeds are either permanent or of long duration or at least for the life-time of the company. 36. In some of the applications, the applicants have prayed to hand over vacant and peaceful possession of parcels of lands particularly described in the application as well as for payment of recovery of rent. The prayer for payment of rent is an alternative prayer, viz., if the possession is not handed over the lessors should be held entitled to rent. At the same time, there ....
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....ould be open to any applicant to seek direction to the Liquidator from the Court that the Liquidator should disclaim the property. The answer has to be in the negative: Section 535(1) specifically states that the Liquidator may with the leave of the Court by writing signed by him disclaim the property. Therefore, the application has to be one which has to be in writing, which has to be signed by the Liquidator and which has to be for disclaimer of the property falling within the four classes of property, particularly described in the said section. In none of the present cases there is any application for disclaimer which would require the Court to determine whether a leave as sought for should be granted. 39. This Court, speaking through Justice Balia in the case 1999 (1) CLR 429 has very categorically turned down similar prayers for handing over possession to the landlords and in the present proceedings no good reason is advanced to take a contrary view of the matter. 40. To summarise : (a)Leasehold interest is an intangible asset, which is valuable in nature though the valuation may differ from case to case depending upon the unexpired period of lease. (b)Such an asset is tra....