TaxTMI 
TaxTMI 
2008 (10) TMI 683
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.... appellants filed the abovenumbered company applications in 1999 and thereafter for a direction to the Official Liquidator to return the land in question to the appellants mainly on the ground that the lease stood determined on winding up order being made by the Company Court. It was also contended that the rights and liabilities of the parties to a lease deed subsist even when the Company is in liquidation and hence provisions of the Bombay Rent Act, 1947 would apply so as to enable the applicants to get back possession of the land in question under the provisions of the Rent Act. 3. The learned Company Judge hearing the abovenumbered company applications had an occasion to consider similar questions in Company Application No.47 of 1993 and connected matters. After considering the relevant provisions of the Companies Act including Sections 457, 535, 529A and also the provisions of Transfer of Property Act, 1882 and the provisions of the Bombay Rent Act, in his judgment dated 30.7.2002, (Legal heirs of deceased Fakirchand Ambaram Patel vs. OL of Ambica Mills Ltd. & ors. reported in (2003) 116 Comp. Cases 588 = 2002 (3) GLH 367), the learned Company Judge laid down the following pr....
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....urgaprasad Shambhuprasad Laskari towards consideration. It was averred in the supporting affidavit that land bearing Survey Nos.4823 to 4832, 4844 to 4895, 4899, 4901 to 4911, 5002 to 5011 and 5049 of Village Ward Raikhad, Ahmedabad admeasuring 35722.41 sq. mtrs. (hereinafter referred to as 'the demised land') was leased out to Bechardas Spinning and Weaving Mills Company Limited by late Durgaprasad Shambhuprasad Laskari. It was further averred that "It may be appreciated that the said land was of ownership of Durgaprasad Laskari and was leased out to the company as the company was taking over the mill owned by Durgaprasad Laskari". Accordingly, the Lease Deed came to be executed on 10-12-1916 by said Durgaprasad Laskari. 5.2 Durgaprasad Shambhuprasad Laskari, who was at the relevant time Managing Director and had controlling interest in Bechardas Spinning and Weaving Mills Company Limited (now Prasad Mills Ltd.), passed away on 7.7.1962 and on his death his properties came to be inherited by the appellants along with other heirs (who have not joined the appellants) under the provisions of the Hindu Succession Act. 5.3 The basis for preferring Company Applicati....
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.... Deed subsisted even when the Company was in liquidation and hence provisions of the Rent Act would apply. Mr. Parikh invited attention to Section 15(1) of the Rent Act as well as Section 13(1)(a) read with Section 13(1)(k) of the Rent Act to contend that provisions of the Rent Act were applicable overriding any other law and that eviction under Section 13 of the Act was de hors the Lease Deed. That the purpose of the Lease was solely to run the mill and once the premises were not used for the purpose for which the premises were let the lessor becomes entitled to seek eviction. 5.6 Alternatively, it was not open to the Official Liquidator to assign rights under the Lease Deed and hence he could not sell them, as only subletting was permissible. It was submitted that there was difference between subletting and assignment. 6. On the other hand, the stand of the Official Liquidator, the secured creditors and the workmen represented by the Textile Labour Association was as under :- 6.1 the provisions of the Rent Act cannot come to the aid of the appellants because in 1916 when the Lease Deed was executed and registered, no Rent Act was in force. That even otherwise, once there was ....
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....y, therefore, would subsist as governed by the provisions of the Transfer of Property Act and there cannot be any eviction from such tenancy. It is also settled position in law that merely because a company goes into liquidation and the Official Liquidator takes charge of the properties of the Company on his appointment, the rights of the Company (in liquidation) vis-a-vis the landlord do not undergo any change and they continue to be governed by the subsisting contract. 7.2 After referring to all the clauses of the lease deed, the learned Company Judge gave the following findings :- (i) The Lease Deed is executed between Sheth Durgaprasad Shambhuprasad Laskari, described as party of the First Part and the party of the Second Part is the Secretary, Treasurers and Agent M/s.Durgaprasad Shambhuprasad Laskari & Company of the Bechardas Spinning and Weaving Mills Company Limited (the Company) and directors Bhulabhai Bulakhidas and Patel Jagjivandas Amthasa of the Company. (ii) Under clause 7 of the lease deed, the lessee is entitled to assign its rights in favour of a third party. (iii) The lessee is entitled to build any superstructure after obtaining necessary permission from ....
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....lso made to Article No.111 of the Articles of Association which provided that every deed or other instrument to which the seal is required to be affixed may be signed by two Directors and the Agents only except where the instrument is in favour of the agent when it shall be signed by two Directors. The learned Company Judge noted that the lease deed was signed by two Directors and the agents and, therefore, the lease deed was signed for and on behalf of the company in liquidation. The learned Company Judge also noted that although the company was ordered to be wound up on 5.5.1989, the first amongst present applications for taking back possession was filed on 8.12.1999 without any explanation for the delay of more than a decade. 7.4 While considering the question whether the lessee had committed any act contrary to Section 108(o) of the Transfer of Property Act, in other words, whether the lessee had used or permitted another to use the property for a purpose other than for which it was leased, the learned Company Judge answered the question in the negative after noting that in the lease deed no specific purpose was provided. On the contrary, a conjoint reading of various clauses ....
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....ncy or statutory tenancy. Section 18 of the Bombay Rent Act prohibits lessee from taking lumpsum consideration for the purpose of surrendering the leasehold interest or transferring the leasehold interest and such prohibition applies to all lessees irrespective of the fact whether the lease is a short-term lease or a long-term lease or whether it is contractual tenancy or statutory tenancy. (iii) Clause 5 of the lease deed is a forfeiture clause and the appellant - lessors are entitled to invoke the said clause. (iv) Clause 7 of the lease deed on page 8 granting lease for 199 years permits only sub-letting but does not permit transfer of leasehold interest. (v) The land was to be used for running a textile mill. While the lease deed did not prohibit construction of additional building over and above the factory premises already constructed, the land of the Company in liquidation cannot be permitted to be used for any other purpose. Relying on the decisions of this Court in 2002 (1) GLR 140 (para 4) (given for wood business, used for scrap business), AIR 2002 SC 1822, AIR 1993 SC 2646, it is submitted that change of user is also a ground justifying the eviction of the tenant a....
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....6 also provides for determination of the lease on the ground of winding-up of the Company. 9.3 In support of the above submission, Mr Desai has placed strong reliance on the decisions in 2001 (7) SCC 409 (paras 15 and 19), 1994 (2) SCC 671, AIR 1980 SC 571 (para 7), AIR 1993 Karnataka 90 (FB) and AIR 1986 Bom. 284 (FB). 9.4 The secured creditor SBI has always been, and is, ready and willing to pay the rent as per the lease deed and all the arrears thereof till the leasehold rights are assigned to another party after public auction. 9.5 When the sale is through a sale committee appointed by the Company Court with representatives of the secured creditors and workers, the mortgagee also sells its own interest in the property. Therefore, there is nothing illegal about the sale of the leasehold interest of the Company in winding up. In support of this submission, reliance is placed on 2002 (10) SCC 682. 9.6 The application before the learned Company Judge for possession of the land in question was filed by seven heirs of the lessor, the OJ Appeal was also filed by seven heirs. However, when the appeal was dismissed and the Division Bench of this Court refused to restore the appeal, ....
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.... Another OJ Appeal is pending. 3 Aryodaya Ginning Mills --- The land owned by lessor admeasuring 58000 sq. mtrs. Has been sold vide OLR No.101/2007 dt. 11.09.2007. 4 Continental Textile Mills --- Winding up petition is pending in Delhi High Court, the leasehold land admeasuring approx. 1,22,000 sq.mtrs. is sold and the sale is confirmed by the Delhi High Court and the highest bid was 41 Cr. The mill is located in Naroda area of Ahmedabad. 5 Arbuda Mills 50/2005 --- 6 Vivekanand Mills 64/2002 --- 7 Ambica, Unit No.1 Com. Appl. No. 287/2005 Referred to Division Bench and majority part of the land was also leasehold land and sale was confirmed in 2003 by the learned Single Judge as per the information,no OJ Appeal is preferred. It is further stated by Mr Vasavada that as per the information available with the Textile Labour Association even conveyance deeds have been executed in favour of the purchasers and the Official Liquidator has already handed over the possession of the properties to the purchasers. Thus, title and possession having been passed on to the purchasers, it is not open to the lessors to contend that the sale was illegal. In fact, the Official ....
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....ft of ₹ 1 crore towards EMD on 04.05.2006 for purchasing the lands leased out to Prasad Mills Ltd. This offer was made in response to the advertisement dated 07.04.2006. The Sale Committee found that the other offer was made without any EMD and, therefore, rejected. The Official Liquidator filed OL Report No.45 of 2006 recommending acceptance of the above offer of Shaan Jhaveri and seeking directions of the Company Court. The said OL Report is still pending before the learned Company Judge. Till the above OL Report was filed on 18.05.2006, the lessors of the land in relation to Prasad Mills Ltd. had not obtained any interim orders in OJ Appeals which were filed in January 2005 but which were never circulated for any urgent orders. For the first time, three OJ Appeals in relation to the lands leased out to Prasad Mills were circulated for admission hearing on 27.06.2006. The Textile Labour Association and the secured creditor, SBI, who were parties before the learned Company Judge, were not initially impleaded as respondents in three OJ Appeals. At the admission hearing also, the appellants did not bring it to the notice of the Court that the process of sale of the leasehold l....
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....ch appealed to the Court. 14. A non-agricultural land was leased for a period of 99 years to establish a factory. Before expiry of the contractual lease period, the lessor filed an application under the relevant provisions of the Karnataka Rent Control Act (the Karnataka Rent Act) enabling the landlord to evict a tenant on the ground of reasonable and bonafide requirement of the landlord. The High Court held that the provisions of the Karnataka Rent Act were applicable dehors the contract of lease and that the lessors were entitled to move a petition for the eviction of the lessee on the ground of reasonable and bonafide requirement of the lessor, even before expiry of the fixed term of 99 years. In taking the above view, the High Court relied on its Full Bench decision which in turn had followed the decision of the Apex Court in Shri Lakshmi Venkateshwara Enterprises case, 1994 (2) SCC 671. 15. After considering the previous decisions including the one in Sri Laxmi Venkateshwara Enterprises, (supra) rendered by a two Judge Bench and also the decision of the seven Judge Bench in Dhanapal Chettiar vs. Yesodai Ammal, (1979) 4 SCC 214, the three Judge Bench in Laxmidas Bapudas Darba....
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....o is significant to emphasise that it relates to grounds alone which cannot be added over and above as provided. The whole contract or other conditions not related to eviction of grounds of eviction shall not be affected. So far as a fixed-term lease is concerned, it shall be affected only to the extent that even after expiry of period of the lease the possession cannot be obtained by the lessor unless one or more of the grounds contained in Section 21 of the Act are available for eviction of the tenant. There is nothing to indicate nor has it been held in any case that in view of Section 21 of the Karnataka Rent Act a contract of fixed-term tenancy stands obliterated in totality. As indicated in the earlier part of this judgment in the case of Dhanapal Chettiar it has been observed in para 5 that none of the State Rent Acts have abrogated or affected the provisions of Section 107 of the Transfer of Property Act which provides for lease of immovable property from year to year or for a term more than a year or reserving a yearly rent. As indicated earlier, the proviso to subsection (1) of Section 21 of the Karnataka Rent Act limits the grounds on which a landlord can seek eviction o....
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.... of the Rent Act do not curtail the contract period was not brought by the learned counsel for the parties to the notice of the learned Company Judge either in Company Application No.47 of 1993 which was decided on 30.7.2002 (reported as 2002 (3) GLH 367) nor was it brought to the notice of the same learned Company Judge when the judgment under appeal was rendered on 13.10.2004. It is all the more unfortunate that this decision was not brought to our notice by the learned advocate for the appellants in spite of repeated queries. 19. Mr Parikh also relied upon the decision of the Apex Court in Gain Devi vs. Jeevan Kumar, AIR 1985 SC 796 in support of his contention that there is no distinction between a contractual tenant enjoying protection under the Transfer of Property Act and a statutory tenant enjoying protection under the Rent Act. We fail to see how this decision takes the appellants' case any further. Gain Devi's case merely dealt with the question whether the heirs of a deceased tenant inherit the tenancy rights in respect of commercial premises, although the amendment to the Delhi Rent Control Act gave personal protection and personal right of continuing in posses....
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....arious State Rent Acts, either in one language or the other, it has been provided that a tenant can be evicted on the grounds mentioned in certain sections of the said Acts, then how does the question of determination of a tenancy by notice arise? If the State Rent Act requires the giving of a particular type of notice in order to get a particular kind of relief, such a notice will have to be given. Or, it may be, that a landlord will be well advised by way of abundant precaution and in order to lend additional support to his case, to give a notice to his tenant intimating that he intended to file a suit against him for his eviction on the ground mentioned in the notice. But that is not to say that such a notice is compulsory or obligatory or that it must fulfil all the technical requirements of Section 106 of the Transfer of Property Act." 22. Mr Parikh for the appellants also placed strong reliance on the judgment of two Judge Bench in KK Krishnan vs. MK Vijaya Raghavan, AIR 1980 SC 1756 in support of the contention that the subletting of premises without consent of the landlord or in absence of right to do so under the lease deed is sufficient to evict the tenant and that ....
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....at the purpose of giving a notice under Section 106 of the Transfer of Property Act is only to terminate the contract of tenancy but it would not be necessary if the tenant incurs the liability of eviction under the provisions of the statute. IN such a case the notice under Section 106 of the Transfer of Property Act would only be a formality and a surplusage and it need not be given by way of any double protection to the tenant. It has been further observed that even though tenancy may be terminated by giving a notice under Section 106 of the Transfer of Property Act yet the landlord will not be in a position to initiate the proceedings for eviction in the absence of any liability incurred by the tenant as provided in the statute. Therefore, notice under Section 106 of the Transfer of Property Act loses significance. 24. Dhanapal Chettiar's case was thus confined to the question about necessity or otherwise of giving notice under Section 106 of the Transfer of Property Act before filing an eviction suit under the Rent Act, where the Rent Act was applicable in the first place. In view of the above direct decision of the Three Judge Bench of the Apex Court which has not only co....
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....njurious thereto: (q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property. 111. A lease of immovable property determines - (a) by efflux of time limited thereby 114. Where a lease of immovable property has determined by forfeiture for non-payment of rent, and the lessor sues to eject the lessee, if, at the hearing of the suit, the lessee pays or tenders to the lessor the rent in arrears, together with interest thereon and his full costs of the suit, or gives such security as the Court thinks sufficient for making such payment within fifteen days, the Court may, in lieu of making a decree for ejectment, pass an order relieving the lessee against the forfeiture; and thereupon the lessee shall hold the property leased as if the forfeiture had not occurred." 26. The relevant provisions of the Bombay Rent Act, read as under :- 13. When landlord may recover possession, - (1) Notwithstanding anything contained in this Act but subject to the provisions of Section 15, as landlord shall be entitled to recover possession of any premises if the Court is satisfied - (a) that, the tenant has committed any act contrary to the provisio....
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....rm lease (which contention was negatived by a three Judge Bench of the Apex Court in Laxmidas Bapudas case, 2001 (7) SCC 409) is not even available to a similarly placed lessor in the State of Gujarat, that is to say, the ratio of the decision of the three Judge Bench of the Apex Court in Laxmidas Bapudas case (supra) would apply with much greater force for the benefit of the lessee under a fixed long term lease in the State of Gujarat. 28. Following the aforesaid judgment in Laxmidas Bapudas Darbar vs. Rudravva, 2001 (7) SCC 409 , we hold that - (i) it is only on expiry of the period of fixed term lease that the lessors can pray for eviction of the company in liquidation or its successor in interest on the grounds which may be available under the Rent Act which may be in operation at the relevant time. (ii) Any ground contained in the agreement of lease other than or in addition to the grounds enumerated in sub-section (1) of Section 13 of the Bombay Rent Act shall remain inoperative during subsistence of the lease and even after expiry of the lease term. (iii) The proceedings for eviction of a tenant under the fixed term contractual lease can be initiated during subsistenc....
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....hold that when rights of the lessee under the lease deed cannot be curtailed by the provisions of the Bombay Rent Act during subsistence of the lease period, the other arguments about applicability of Sections 15, 18 and 19 can also not be accepted. 32. Mr Parikh also strongly relied on the decision of the Apex Court in Parasram Harnand Rao vs. Shanti Prasad Narinder Kumar Jain, AIR 1980 SC 1655 in support of the contention that assignment or subletting for the purpose of evicting the tenant, would include not only voluntary sale, but also include an involuntary sale and that sale of the property of the Company in liquidation by the Official Liquidator would also be included in such assignment. 33. The observations made by the Apex Court in Parasram's case (supra) indicate that the Official Liquidator had merely stepped into the shoes of the Company in winding up and even if the Official Liquidator had transferred the tenancy interest to the third party under the orders of the Court, it was a voluntary sale falling within Section 14(1)(b) of the Delhi Rent Control Act and that assuming that the sale by the Official Liquidator was an involuntary sale, then also it became as as....
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.... rent of ₹ 1200 per annum. The Apex Court set aside the direction given by the Company Court to the Official Liquidator to surrender the land to the lessors for avoiding the "onerous covenant" of paying the rent of ₹ 1200 p.a.. In the process, the Apex Court made the following observations :- "Under Section 535, the High Court may give leave to the Official Liquidator to disclaim land of any tenure which is part of the property of the company in liquidation if it is burdened with onerous covenants. The intention of Section 535 is to protect the creditors of the company in liquidation and not mulct them by reason of onerous covenants. The power under Section 535 is not to be lightly exercised. Due care and circumspection have to be bestowed. It must be remembered that an order permitting disclaimer, while it frees the company in liquidation of the obligation to comply with covenants, puts the party in whose favour the covenants are, to serious disadvantage. The Court must therefore, be fully satisfied that there are onerous covenants, covenants which impose a heavy burden upon the Company in liquidation, before giving leave to disclaim them. 11. We are of the view th....
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....se deed permits only subletting and not assignment of leasehold rights of the lessee. The argument is misconceived because the rights available to a lessee are not merely the rights under the lease deed but also the right under clause (j) of Section 108 of the Transfer of Property Act, the relevant portion of which reads as under :- 108. Rights and liabilities of lessor and lessee, - In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased :- B. - Rights and Liabilities of the Lessee (j) the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease: (emphasis supplied) Merely because Clause 7 of the lease deed confers upon the lessee the right to sublet the demised land and the superstruct....