AI Drafter 
TaxTMI 
TaxTMI 
2017 (7) TMI 181
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....cation till realization. 2. The Official Liquidator has filed a report bearing no. 610 of 2015 inter alia praying for a direction for reduction of reserve price of Rs. 22 crores fixed by this court in respect of the property of the company in liquidation specified as lot no.3 viz. the leasehold open land admeasuring to 3743.21 sq.mtrs. situated at Survey No.194/1, Village Majiwade, Thane (West), District Thane - 400 606 or in the alternate seeks appropriate directions in this regard. By consent of parties, company application as well as Official Liquidator's Report were heard together and are being disposed of by a common order. 3. Some of the relevant facts for the purpose of deciding these proceedings are as under :- It is the case of the applicant that by virtue of a lease agreement dated 1st July, 1968 for a period of 60 years, M/s.Devidayal Industries Limited (In liquidation) was granted lease in respect of the open land admeasuring 3743.21 sq.mtrs. bearing survey no.194/1 (Part) situated at Village Majiwada, Tal Salsette, Dist.Thane for a period of 60 years on payment of annual term and on the terms and conditions setout therein. As per the lease agreement, the l....
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....r for reduction of reserve price of Rs. 22 crores fixed by this court or in the alternate for other appropriate directions in this regard. This court by an order dated 20th October,2016 directed that the Official Liquidator's Report be placed along with Company Application No.634 of 2016 filed by the applicant. Each of the party has filed affidavit in the proceedings filed by the other parties. 8. Mr.Dani, learned senior counsel for the applicant invited my attention to the lease deed dated 1st July, 1968 between the applicant and the company in liquidation in respect of the property in question and submits that the company in liquidation was granted the open piece of land on lease for a period of 60 years which would expire on 1st July, 2028. It is submitted by the learned senior counsel that the respondent company has committed default in making payment of the rent since 1st April, 1993 and the total rent of Rs. 19,800/- is still due and payable by the company in liquidation to the applicant. He submits that the provisions of Bombay Rent Control Act, 1947 were in force when the lease in respect of the property in question was granted to the respondent company till 1999. He....
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....onsent or transfer of the leasehold right of the company in liquidation to any third party. Learned senior counsel for the applicant placed reliance on the judgment of Supreme Court in case of Ravindra Ishwardas Sethna and another vs. Official Liquidator, High Court, Bombay and another, (1983) 4 SCC 269 and in particular paragraphs 2 and 6 to 11 and submits that even if the liquidator could have carried on business of the respondent company by exercising the power under section 457 of the Companies Act, 1956, since the Official Liquidator in this case admittedly had applied for sale of the property in question, the question of any intention on the part of the Official Liquidator to carry on business by use of the property in question for the beneficial use of the winding up of the respondent company did not arise. 12. In his alternate submission, it is submitted that even if the Official Liquidator is permitted to carry on any business of the company by using the said property in question, the business that can be permitted to be carried out must be the same business which was carried out by the company in liquidation prior to the date of its winding up. He submits that the Offi....
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....at the lessee shall not assign or sublet or otherwise part with the whole of the demised premises without the previous consent in writing of the lessors first obtained, which consent shall not be unreasonably withheld by the lessors. He submits that there is thus no prohibition under the said lease deed from subletting or parting with the property in question with previous consent of the lessor in writing which consent cannot be unreasonably withheld if applied by the lessee. In support of this submission, learned counsel placed reliance on the judgment of Supreme Court in case of Kamala Ranjan Roy vs. Baijnath Bajoria, AIR 1951 SC 1 and in particular paragraph (9). He submits that in view of such provisions in the lease deed if the permission is withheld by the lessor for subletting or parting with the demised premises unreasonably, the lessee is relieved from the burden of the said covenant of not subletting or parting with possession without consent of the lessor. He submits that the Official Liquidator is thus empowered to sublet or otherwise part with possession of the property in question to a third party. 16. Learned senior counsel for the Official Liquidator placed relia....
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....e of the interest of the creditors and contributories but also workmen who would have pari-passu charge thereon. 19. It is submitted that since the leasehold rights of the respondent company in liquidation are valuable assets and since the balance lease period is 11 years as on today, this court cannot direct the Official Liquidator to handover possession of the property in question to the lessor during the pendency of the winding up process of the respondent company in liquidation. He submits that in this case, the Official Liquidator has not applied for leave of this court to disclaim the property in question on the ground that the said property is burdened with onerous covenants or otherwise under section 535 of the Companies Act, 1956. He submits that since the lease deed is admittedly not determined, the relationship of the lessor and the lessee continues to subsist till the period for which the lease is in subsistence. It is submitted that the Gujarat High Court has accordingly rejected the application of the lessor to handover possession of the leasehold premises to him. 20. It is submitted by the learned counsel for the Official Liquidator that under section 108(j) of....
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....February, 1993 in case of Bimla Holding Company Pvt. Ltd. vs. Dempo Steamship Ltd. & Ors. in Company Application No.359 of 1988 in Company Petition No.88 of 1987 and also the judgment of Division Bench arising out of the said judgment dated 15th February, 1993 in case of Dempo Dairy Industries Pvt. Ltd. & Ors. vs.Bimla Holding Co. Pvt. Ltd. & Ors. and the Official Liquidator in Company Appeal No.359 of 1988 delivered on 8th July, 1994 and would submit that the Division Bench of this court has set aside the judgment of the learned Single Judge directing the Official Liquidator to handover possession of the leasehold property to the lessor. He submits that the matter was however settled in the Supreme Court in Special Leave Petition filed by the lessor. He submits that the judgment of Division Bench is not set aside by the Supreme Court. 25. Learned counsel for the Official Liquidator placed reliance on the judgment delivered by the Full Bench of this court in case of Tangerine Electronics Systems Pvt. Ltd. vs. Indian Chemicals & Ors., 2004(5) Bom.C.R.673 and in particular paragraph 39 and would submit that the judgment of Division Bench of this court in case of Saraswat Co-operat....
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....said order, the Division Bench has stayed the trial of the said Suit No.36 of 1969. 28. It is submitted by the learned counsel for the Official Liquidator that in view of the status quo order passed by the learned Single Judge of this court which order is not interfered with by the Division Bench of this court in respect of the property in question also, the applicant cannot seek possession of the property in question which is also subject matter of the said suit in which the applicant herein along with other defendants thereto are directed to maintain status-quo in respect of the property in question and various other properties. 29. It is submitted by the learned counsel for the Official Liquidator that unless the lease is terminated after obtaining leave of company court under section 446(1), no prayer for possession of the property can be granted by this court in favour of the lessor. He submits that the relationship of the lessor and the lessee continues. He submits that the right under section 108(j) of the Transfer of Property Act also remains unaffected and thus the Official Liquidator is empowered to sublet the property in question. He lastly submits that if this cou....
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....erty in question is handed over by the Official Liquidator to the applicant, the applicant can apply for modification of the said status-quo order in the said proceedings and thus this court can direct the Official Liquidator to handover the possession of the property in question to the applicant. He submits that this court cannot permit the Official Liquidator to give the property in question on leave and licence basis or on care taker basis or under any other arrangement. He submits that in any event, no such case is made out by the Official Liquidator that the said property in question is required for the beneficial use of the winding up of the respondent. REASONS AND CONCLUSIONS 33. It is not in dispute that by virtue of a lease agreement dated 1st July, 1968 entered into between the applicant i.e. The Provident Investment Company Ltd. and the respondent now in liquidation, the respondent was granted lease in respect of the open land admeasuring 3743.21 sq.mtrs. bearing Survey No.194/1 (Part), situated at Village Majiwade, Taluka and District Thane for a period of 60 years on payment of annual term and on the terms and conditions setout therein. The said lease period woul....
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....rve price of Rs. 22 crores fixed by this court or in the alternate for other appropriate directions in this regard. 37. The applicant herein thereafter filed the company application bearing Company Application (L) No.634 of 2016 in this court inter alia praying for an order and directions against the Official Liquidator to handover the possession of the leasehold land and for payment of arrears of land to the applicant in respect of the said property. By an order dated 20th October,2016, this court directed that both the proceedings be heard together. It is not in dispute that till date, the applicant has not challenged the order passed by this court on 26th December 2012, 19th December 2012, and 5th February, 2013 and 11th October 2015. The orders passed by this court from time to time for sale of the leasehold land in question has thus attained finality. The applicant has also not applied for vacating or for modifying the said orders till date. 38. This court thus will have to also consider whether this court can direct the Official Liquidator to handover possession of the leasehold land to the lessor in teeth of the orders passed by this court directing the Official Liquid....
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....ompany Court Rules and does not cease to be a legal entity so far. The Official Liquidator is not discharged by this court in respect of the affairs of the respondent company in liquidation till date. Under section 456 of the Companies Act, 1956, in view of this court having passed an order of winding up against the respondent company in liquidation and having appointed the Official Liquidator, all the properties of the respondent company in liquidation, the effect and actionable claims to which the company is and appears to be entitled, to vest in the court and custody and control thereof has to be taken by the Official Liquidator. 42. A perusal of the record indicates that the official liquidator has already taken possession of the said leasehold open land admeasuring to 3743.21 sq.mtrs. which is the subject matter of the said lease deed and since then the same is in possession of the official liquidator. A perusal of the lease deed executed by the applicant in the company application and the respondent company in liquidation on 1st July 1968 clearly indicates that the said lease was for initial period of 60 years commencing from 1st July 1968 with a renewal clause under which....
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....se in view of the fact that the respondent company is not finally dissolved as contemplated under Section 481 of the Companies Act, 1956. The principles of law laid down by the Supreme Court in the case of Jabal C.Lashkari & Ors.(supra) apply to the facts of this case. I am respectfully bound by the said judgment. In my view, the parties in this case would be governed by the provisions of the Transfer of Property Act, 1882. Under Section 108(j) of the Transfer of Property Act, 1882 subject to the contract to contrary, the lessee is entitled to transfer the leasehold land in favour of a third party. 46. A perusal of the lease deed dated 1st July 1968 indicates that in clause 2(v) of the said lease deed, it was provided that the lessee shall not assign or sublet or part with the whole of the demised premises without the previous consent in writing of the lessor first obtained which consent shall not be unreasonably withheld by the lessor. Similar clause in the agreement has been repeatedly construed by the Supreme Court and various High Courts. In the case of Kamala Ranjan Roy Vs. Baijnath Bajoria, reported in AIR 1951 SC 1, it is held by the Supreme Court if the consent is unreas....
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....ordingly thus set aside the order passed by the learned Company Judge authorising the official liquidator to enter into such agreement. It is held by the Supreme Court that the learned Company Judge could not have permitted holding on to possession of the premises, not needed for efficiently carrying on winding up proceedings. The only course open to him was to direct the Liquidator to surrender possession to landlords and save recurring liability to pay rent. 50. The landlords in that matter had offered to deposit compensation amount that would have been faced by the official liquidator for making payment to the creditors and had in fact deposited the said amount in Court. In those circumstances, Supreme Court had directed the official liquidator to return the tenanted premises to the landlords. 51. However, in the facts of this case, the official liquidator has placed on record the lease agreement entered into between the applicant and the respondent company in liquidation. It is an admitted position that the original lease period of 60 years would expire on 30th June 2028 after more than 11 years. There is also an option to apply to the lessee for further renewal for a per....
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....ition that the land in question is no longer required for the company in liquidation. In this case admittedly this Court has already granted permission and directions to the Official Liquidator to sell the assets of the company in liquidation, including the leasehold rights which order is in force and is binding on all the parties and also the Official Liquidator. The judgment of this Court in case of Patel Engineering Co. Ltd. (supra) thus relied upon by the learned senior counsel for the applicant is clearly distinguishable in the facts of this case and would not assist the case of the applicant. 54. Insofar as the judgment delivered by the Division Bench of this Court in case of Saraswat Co-Operative Bank Ltd. (supra) relied upon by the learned senior counsel for the applicant is concerned, a perusal of the said judgment clearly indicates that the Official Liquidator who was directed to unconditionally surrender the premises to the landlord by the learned Company Judge, made a statement before the Company Judge that the premises in question were not required for beneficial winding up of the company and he had no objection if the premises were to be surrendered to the landlord....
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.... company vis-a-vis its landlord and/or tenants do not undergo any change. It is further held that after considering its earlier decision in case of Ravindra Ishwardas Sethna & Anr. (supra) that the Official Liquidator who required portion of the flat for storing the company books was certainly irrelevant consideration and could not be forced to store the books in his office or any where else so long as the reason given by him for continuing in possession was irrelevant one. 58. The Division Bench of this Court by a judgment dated 8^th July, 1994 in case of Dempo Dairy Industries Pvt. Ltd. vs. Bimla Holding Co. Pvt. Ltd. & Ors. in Company Appeal No.215 of 1993 has set aside the judgment dated 15th February, 1993 delivered by the learned single Judge in Company Application No.359 of 1988 in Company Petition No.88 of 1987 in case of Bimla Holding Co. Pvt. Ltd. vs. Dempo Steamship Ltd. & Ors. Learned single Judge of this Court in the said judgment dated 15th February, 1993 had directed the sub-tenant to hand over possession of the leasehold property to the Official Liquidator. 59. The Division Bench of Gujarat High Court in case of Jabal Lashkari vs. Official Liquidator of Prasad....
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....ing care of the interest of the creditors and contributories but also of the workmen who have pari passu charge. It is further held that it would enable the Court to exercise jurisdiction in relation to all the properties of the company in liquidation including valuable assets like leasehold rights of unexpired portion of the lease. There cannot be any dispute as regards the legal position that the corporate existence of the company in liquidation continues till dissolution and the liquidator steps into the shoes of the company; he is however, under the control and supervision of the Court and whatever he does, more particularly, in respect of the sale of the assets of the company in liquidation is for the purpose of implementation of the order and under sanction of the Court. It is held that 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. 63. The Gujarat High Court also followed and applied the principles laid down by this Court in case of Vaz Forwarding Ltd. vs. State Bank of India (1996) 85 Company Cases 603 and held t....
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....port that the surrounding area consists of multi storeyed residential building and the property has good access from the road. In the said report, the valuer has not considered the additional factor that there was an option of renewal of the lease given to the lessee for another period of 60 years on the same terms and conditions not only in favour of the lessee itself but any other party in favour of any person or persons or body corporate or incorporate as lessee shall direct. 67. Be that as it may, the leasehold rights in favour of the company in liquidation which is intangible and the valuable assets and being in existence, cannot be directed to be returned to the applicant lessor for the reasons recorded aforesaid. Merely because an order of winding up is passed by this Court in respect of the respondent company, that cannot be a ground to direct the Official Liquidator to hand over possession of the land to the lessors in view of the fact that the respondent continues to maintain its corporate existence until the same is dissolved upon completion of the liquidation proceedings as contemplated under section 481 of the Companies Act. 68. In my view, since this Court has a....
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.... the suit properties, they could do so after obtaining permission from the Court. The applicant herein was the defendant no.1 in the said suit. 71. Being aggrieved by the said order dated 27th January, 2010, passed by the learned single Judge of this Court, the applicant herein preferred an appeal (302 of 2011) before the Division Bench of this Court. By an order dated 13th January, 2012, the Division Bench of this Court has entrusted the matter to CBI for conducting an enquiry into the circumstances in which the records pertaining to the L.C. Suit No.36 of 1969 had been destroyed and/or had gone missing from the Registry of this Court. The trial court proceedings have been stayed by the Division Bench. The said appeal filed by the applicant herein is still pending. It is not in dispute that the said interim order passed by this Court on 27th January, 2010 against the applicant herein and another is in force and is subsisting. 72. Insofar as the submission of the learned senior counsel for the applicant that the said status-quo order passed by this Court in the said notice of motion would not prohibit the applicant from taking possession of the leasehold land and if this Cour....