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2008 (10) TMI 683
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....mpany Application No.21 of 1984, the 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 Co....
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....eaving Mills Company. Shares of the said Limited Company were issued in favour of late Durgaprasad 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 provi....
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....ng up order being made by the Court; that rights and liabilities of the parties to a Lease 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 Leas....
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.... is a subsisting contract and the parties would be governed by the terms of the contract. The contractual tenancy, 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 i....
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....n liquidation was in possession of the land in question and the construction made thereon under registered lease deed dated 14.12.1916. Reference was also 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 t....
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....ase premises and the said prohibition is applicable 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. 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 i....
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....at the Bombay Rent Act is not applicable in case of long term lease. It is also submitted that the lease deed does not provide that upon the order of winding up being passed against the lessee company, the lease will come to an end. None of the provisions of the Companies Act, 1956 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....
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....did not pray for any interim stay of the order of the learned Single Judge during pendency of the OJ Appeals and therefore, leasehold lands have been sold by the Sale Committee consisting of the Official Liquidator and representatives of the secured creditors and the Textile Labour Association. The details of the said Mills are as under :- Sr.No. Name of Mill OJ Appeal Remarks 1 Vijay Mills 50/2003 --- 2 Aruna Mills 72/2002 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....
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....e no right of re-entry. Reliance is placed on the following decisions :- 6 GLR 512 (513) 1996 (1) GLH 203 1996 (85) Comp. Cases 603 (Bombay) 2004 (3) GLH 416 (419, Para 8) 10.5 Absence of notice to lessor does not render the sale void. In support of the submission, reliance is placed on the decisions in - 2003 (10) SCC 482 2007 AIR SCW 4080 (4086, para 11) 1995 (1) GLH 12 (19) INTERVENTION BY THIRD PARTY 11. Mr AS Vakil appears for Shaan Jhaveri who had made the highest offer of Rs. 7.75 crores along with a Demand Draft of Rs. ....
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....up of the lessee - company. In Ravindra Ishwardas Sethna, AIR 1983 SC 1061, the Apex Court interfered even after the property of the Company in liquidation was sold and the purchaser was put into possession. DISCUSSION 13. Though the contentions on behalf of the appellants, were more or less those canvassed before the learned Company Judge and though the learned advocate for the appellants cited more than 50 (fifty) decisions for the purpose of buttressing his legal submissions, in spite of the repeated queries from the Court as to whether, in the matter of applicability of Rent Act, there was any distinction between a fixed term or long term lease and a short term lease, the learned advocate for the appellants went on asserting that there was no such decision. It was the learned counsel for the respondents who invited our attention to the direct decision of a three Judge Bench of the Apex Court in Laxmidas Bapudas Darbar vs. Rudravva 2001 (7) SCC 409 = AIR 2001 SC 3738. Since it is a direct decision of a three Judge Bench on the above distinction, it is necessary to note the facts giving rise to the decision in Laxmidas Bapudas (supra), and the reasoning which appealed to....
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....of the Karnataka Rent shall have an overriding effect over any other law or a contract. The Rent Acts have primarily been made, if not wholly, to protect the interest of tenants, to restrict charging of excessive rent and their rampant eviction at will. In that view of the matter, Section 21 of the Karnataka Rent Act provides that notwithstanding anything to the contrary contained in any contract, no order for eviction of a tenant shall be made by the court or any other authority. Undoubtedly, it is a provision providing statutory protection to the tenants as it is also evident from the heading of Section 21 of the Act. This prohibition is however relaxed under the proviso saying that an order for recovery of possession of the premises can be made on an application made on that behalf only on the grounds as enumerated in clauses (a) to (p) to the proviso. The non obstante clause contained under Section 21 of the Act, will override any condition in any contract which may provide a ground for eviction other than those enumerated in clauses (a) to (p) of sub-section (1) of Section 21. Such an additional ground in a contract shall be rendered ineffective. The use of the word "only" in ....
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....to the grounds enumerated in clauses (a) to (p) of sub-section (1) of Section 21 of the Act shall remain inoperative. (iii) Proceedings for eviction of a tenant under a fixed term contractual lease can be initiated during subsistence or currency of the lease only on a ground as may be enumerated in clauses (a) to (p) of sub-section (1) of Section 21 of the Act,if and only it is also provided as one of the grounds of forfeiture of the lease rights in the lease deed, not otherwise. (iv) The period of fixed-term lease is ensured and remains protected except in the cases indicated in the preceding paragraph. 19. With great respect therefore, in our view, the decision in the case of Dhanapal Chettiar has not been correctly construed in the case of Shri Lakshmi Venkateshwara Enterprises (p) Ltd. and it no more holds good nor the Full Bench decision following it, in the case of Bombay Tyres International Ltd. The earlier judgment of the Full Bench of the High court in the case of Sri Ramakrishna Theatres Ltd. lays down the law correctly." (emphasis supplied) It is unfortunate that the aforesaid direct decision of a Three Judge Bench of the Apex Court squar....
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....is prohibited by Section 15 of the Rent Act and that it would also be contrary to public policy. That decision was not at all concerned with a long term or a fixed term lease, unlike the three Judge Bench decision in Laxmidas Bapudas case, 2001 (7) SCC 409. 21. Mr Parikh for the appellant-landlords, however, heavily relied on the following observations made by the Seven Judge Bench of the Apex Court in V. Dhanapal Chettiar vs. Yesodai Ammal, 1979 (4) SCC 214 :- "Section 108 deals with the rights and liabilities of lessors and lessees. Many State Rent Acts have brought about considerable changes in the rights and liabilities of a lessor and a lessee, largely in favour of the latter, although not wholly. The topic of Transfer of Property other than agricultural land is covered by Entry 6 of List III in the Seventh Schedule to the Constitution. The subject being in the concurrent list, many State Rent Acts have by necessary implication and many of them by starting certain provisions with a non obstante clause have done away with the law engrafted in S. 108 of the Transfer of Property Act except in regard to any matter which is not provided for in the State Act either expre....
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.... seen that the lease in that case was not a long term lease. Besides, in paras 12 and 13 of Laxmidas Bapudas Darbar vs. Rudravva, (2001) 7 SCC 409 = AIR 2001 SC 3738, a Three Judge Bench of the Apex Court explained the proposition of law laid down in Dhanapal Chettiar's case in the following words :- "The facts (in Dhanapal Chettiar's case) being that the landlady moved an application for eviction of her tenant under the provisions of the Tamil Nadu Rent Act on the ground of her personal need. The petition was dismissed. On appeal, though her case of bona fide requirement was upheld but eviction was refused due to lack of notice to quit in accordance with law. The High Court dealing with the matter in revision, held that notice to quit under Section 106 of the Transfer of Property Act was not necessary for seeking an eviction of a tenant under the provisions of the Rent Act. The question therefore, as was under consideration before this Court is mentioned in para 1 of the judgment itself which is quoted below : ".... as to whether in order to get a decree or order for eviction against a tenant under any State Rent Control Act it is necessary to give a noti....
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....the Lessor (c) the lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contract binding on the lessee, he may hold the property during the time limited by the lease without interruption. The benefit of such contract shall be annexed to and go with the lessee's interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested. 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: (o) the lessee may use the property and its products (if any) as the person or ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell or sell timber, pull down or damage buildings belonging to the le....
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....y sum, or any consideration as a condition of the relinquishment transfer or assignment of his tenancy of any premises. (2) Any tenant or person who in contravention of the provisions of sub-section (1) receives any sum or consideration shall, on conviction, be punished with imprisonment for a term which may extend to six months and shall also be punished with fine which shall not be less than the sum of the value of the consideration received by him." 27. A perusal of the aforesaid provisions, particularly subsection (1) of Section 13 of the Bombay Rent Act makes it clear that the non-obstante clause with which sub-section (1) of Section 13 (providing for various grounds of eviction) commences gives subsection (1) overriding effect only over other provisions of the Bombay Rent Act (but makes it subject to the provisions of Section 15 of the Bombay Rent Act) and the non-obstante clause does not give any overriding effect over "any other law or contract", unlike the non-obstante clause in Section 21 of the Karnataka Rent Act quoted in para 16 hereinabove. In other words, the contention urged by the lessor in the State of Karnataka that Section 21 of the Karnataka Rent Ac....
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....tion before expiry of the term, a ground mentioned in Section 13(1) of the Bombay Rent Act. There is no such ground in the lease deed which gives the lessor the right of re-entry except in case of failure to pay rent for which protection is given to the lessee both by the provisions of Section 114 of the Transfer of Property Act and Section 12(3) of the Bombay Rent Act. Since the order of winding up was passed on 5.5.1989 and since the secured creditors and workers have always shown readiness and willingness to pay rent and arrears thereof, the lessors are not entitled to claim or get possession of the land leased to the company presently in winding up. 30. The appellants' contention about liability of the lessee to be evicted for change of user is also without any basis. Apart from the lease deed not providing for any such ground, the lease deed itself does not indicate any particular use to be made by the lessee (para 7.4 hereinabove). 31. In view of the above finding, all the arguments made by Mr Parikh, learned advocate for the appellant- landlords fall to the ground and, therefore, it is not necessary to deal with a number of authorities cited by him which are incons....
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....nst subletting or assignment of leasehold rights in favour of a third party. 34. Reliance placed by the appellants on the decision in Ravindra I Sethna vs. OL, 1983 (4) SCC 269 is also misconceived as it was a case of short term lease which had already expired when the Company Court directed the OL to give the premises of the Company in winding up to get compensation from a caretaker. 35. So also the decision in Nirmala Bafna's case, 1992 (2) SCC 322 does not carry the appellants' case any further. On the contrary, the Apex Court in terms laid down therein the legal principle that "merely because a company goes in liquidation and a liquidator/ Official Liquidator is appointed, the rights of the company vis-a-vis its landlord (and/or its tenants) do not undergo any change". Hence the fixed term of 199 years in the lease deed at hand is not curtailed by the order of winding up passed in the year 1989. The other observation that "the tenancy rights the company had in the said flat may not be an asset for the purpose of liquidation proceedings" were not made in the context of a long fixed term lease. 36. The case nearer to the one at hand is United Bank of India vs. Of....
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....ave been accepted by the High Court. The Bank to protect and keep alive its security, had put Official Liquidator in funds in regard to other mattes and was eager to meet this liability. Had this been done valuable property of the company in liquidation could have been retained so that its undertaking, which stood on the said land, could have been sold as running concern, as has been done upon intervention of this Court, for the benefit of its creditors." (emphasis supplied) In the facts of that case, the Apex Court set aside the High Court's direction to the Official Liquidator to disclaim the land and hand over possession thereof to the landlord trust. It directed the Official Liquidator to sell the assets and properties of the company in liquidation, including the land in question and the Apex Court also directed the Official Liquidator to pay the landlord trust a sum of Rs. 10 lacs in full and final settlement of the landlord's claim against the company in liquidation of whatever nature in respect of the said land. The Apex Court held that the landlord trust would be amply recompensed if it received as compensation for the disposal of its right in the said land an....
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....on by the appellants being Smt Jatan Kumar Colcha vs. Golcha Properties (P) Ltd., 1970 (3) SCC 573, and in East India Company vs. Official Liquidator, (1969) II Comp.LJ 253 (Guj.) dealt with the cases where the grievance was made by the petitioning creditor who was not given any notice before the Company Court gave directions on the Official Liquidator Report for sale of properties of the Company in winding up. We fail to see how these decisions can be of any assistance to the appellants. In those cases reliance was placed on Rule 139 of the Companies (Court) Rules, 1959 which provides that if the Official Liquidator wants to sell any property of the Company in liquidation in exercise of the power under Section 457, subsection (1) clause (c), he must take out a summons for directions and notice of the summons must be given to the petitioner on whose petition the winding up order is made. Rule 109 invoked on behalf of the appellant in the written submissions is also irrelevant. On the contrary Rule 33, inter-alia, provides that no proceedings under the Act or these rules shall be invalidated by reason of any formal defect or irregularity; unless the Judge before whom the objection i....