TaxTMI 
TaxTMI 
2018 (7) TMI 1763
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....in view of para 34A of the report, this Hon'ble Court be pleased to hold and declare that the sale or liquidation of the subject property in the course of winding up of the allottee/lessee is a formal transfer under the extant MIDC Circulars and therefore not subject to payment of "Differential premium"; (b) (2) Whether in view of para 42A of the report, this Hon'ble Court be pleased to exercise powers under Section 446 (2) of the Companies Act, 1956 read with MIDC Circular dated 11th June 2011 and waive the levy of "Extension Charges" as claimed by MIDC over the subject property; (c) Whether this Hon'ble Court be pleased to direct MIDC to file its claim with regard to the charges that would become payable upon the said property being transferred so as to enable the Official Liquidator to take steps for revaluation and sale in compliance of the Hon'ble High Court order dated 1st July 2016. 2. Official Liquidator was appointed pursuant to an order dated 22nd January 2008 as Liquidator of Transpower Engineering Limited [the company (in liquidation)]. The subject matter of this Official Liquidator's Report are two plots bearing no.A­26/3 admeasuring 64....
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....o the show cause notice that it had issued on 12th June 2010. In the meanwhile, on or about 17th February 2011, Official Liquidator had already taken possession of the said plots. 6. On 21st September 2011, MIDC cancelled the allotment of the said plots as the company had not filed a reply to the show cause notice and called upon the company to return the documents of the said plots. Again this was addressed to the company and not to Official Liquidator even though more than three years had passed after the company was ordered to be wound up and after Official Liquidator took possession. This position is not disputed by MIDC. Even after MIDC had express knowledge of the order of winding up and the appointment of the Official Liquidator, it took no steps vis­à­vis the Official Liquidator. 7. On 23rd January 2012, Official Liquidator, pursuant to order dated 13th January 2012 passed in company application no.583 of 2011 filed by the workers of the company (in liquidation), invited claims from the workers/creditors under Rule 148 of the Companies (Court) Rules, 1959. The last date for filing the claims was 10th February 2012. Official Liquidator received 285 claim....
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....000/­. MIDC had also raised objection to the jurisdiction of this Court to order any waiver or modification of these charges. I must add this is the stand taken by MIDC even today. 9. In view of the stand of MIDC, Gold Chip took out an application bearing lodging no.544 of 2015 and sought refund of the amount of Rs. 8,50,00,000/­ paid to Official Liquidator and also claimed damages. The Court allowed refund of the amount together with interest thereon at 9% p.a. But, there was a problem. The problem was, Official Liquidator had, in the meanwhile, utilised part of this amount of Rs. 8,50,00,000/­ to pay some of the workers' dues, which I am informed, was in the region of about Rs. 1,50,00,000/­. 10. As MIDC had filed a reply dated 24th June 2014 in company application no.358 of 2013, this Court in its order dated 1st July 2016 in Official Liquidator's Report No.67 of 2016, had directed Official Liquidator to file a report to this Court in respect of the charges payable to MIDC for any transfer of the said plots in favour of third party. Pursuant thereto, Official Liquidator by a letter dated 9th March 2015 to MIDC, called upon MIDC to lodge their claim ....
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....is payable. I agree with Shri Jagtiani. JURISDICTION : 14. It is MIDC's case that (a) MIDC is a statutory corporation established under MID Act 1961; (b) MID Act is complete code dealing with powers, duties, obligations of MIDC and as well as acquisition and disposal of land and other aspects relating to the allotment of plots by MIDC; (c) various circulars, where the policy towards transfer charge, differential charges, extension charges, etc., have been issued in exercise of statutory powers by MIDC; (d) only after the application for transfer of plots is made by the allottee to MIDC in the prescribed format alongwith necessary documents as required by MIDC, a separate order for payment of the charges towards transfer charges and extension charges, service charges, as applicable will be issued and such an order would not be amenable to modification or challenge before the Company Court exercising powers under the Companies Act 1956; (e) since such an order is yet to be passed, the application of Official Liquidator is premature because the amounts are yet to be determined and (f) since Official Liquidator is seeking a declaration as stated in prayer clause b(1) and b(2)....
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....quidator, as the case may be, shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled. (1A) ........... (1B) .......... (2) All the property and effects of the company shall be deemed to be in the custody of the court as from the date of the order for the winding up of the company. 457. Powers of liquidator. (1) The liquidator in a winding up by the Court shall have power, with the sanction of the Court, (a) .......... (b) .......... (c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; ........... 17. Shri Jagtiani relied upon judgment in the matter of (i) Sisters of St. Joseph of Cluny V/s. The State of West Bengal and Ors. 2018 SCC Online SC 397, (ii) Maharashtra Industrial Development Corporation and Ors. V/s. Mahendra G. Wadhwani MANU/MH/0086/1995 and (iii) Ajay Y. Mafatlal V/s. M/s. Mafatlal Dyes Chemicals Limited 2015 SCC Online Bom 7696 in support of his submissions that this Court has....
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....ee appointed for examining comprehensive amendment to the Companies Act in its report recommended that 'a suit' by or against a company in winding up should notwithstanding any provision in law for the time being be instituted in the court in which the winding up proceedings are pending. (1) 'To give effect to these recommendations, sub­sec. (2) was suitably amended to bring it to its present from by Companies (Amendment) Act, 1960. The Committee noticed that on a winding up order being made and the Official Liquidator being appointed a Liquidator of the company, he has to take into his custody company property as required by Sec. 456. Sec. 457 confers power on him to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company. Power is conferred upon him to sell the properties both movable and removable of the company and to realise the assets of the company and this was to be done for the purpose of distributing the assets of the company amongst the claimants. Now at a stage when a winding up order is made the company may as well have subsisting claims and to realise these claims the Liquidator will have to....
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....ompany which otherwise it may not have enjoyed. The court in the Companies Act is defined in Sec. 2(11) to mean with respect to any matter relating to a company (other then any offence against this Act), the Court having jurisdiction under the Act with respect to that matter relating to that company, as provided in Section 10. Section 10 provides that the court having jurisdiction under the Act shall be the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub­sec. (2). The winding up petition has thus to be presented in the High Court before the Judge who is assigned the work under the Companies Act. Therefore, the Court which is winding up the Company will be the court to whom the petition for winding up was presented and which passed the order for winding up the Company. In this case, the order was made by the learned Company Judge in the Kerala High Court directing winding up the company. An appeal lies against the order for winding up the Company und....
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....an ever arise." This Court in Ajay Y. Mafatlal (Supra) considered the decision of the Hon'ble Supreme Court passed in Sudarsan Chits (I) Ltd. (Supra) and held that Section 446 of the Act gives very wide powers to the company court. This Court held that Section 446(2) of the Act conferred wide jurisdiction on the court winding up the company to entertain, amongst others, any suit or proceeding by or against the company or any claim made by or against the company or any other question whatsoever which may relate to or arise in course of the winding up of the company. 19. Therefore, as the winding up proceedings used to drag on for decades with no end in sight and with no benefit to the creditors and contributories of the company, to accelerate the process of winding up so as to bring them to an end, this sub­section was amended in its present form in 1960 conferring jurisdiction on the court winding up the company to entertain amongst others any suit or proceeding by or against the company or any claim made by or against the company or any other question whatsoever which may relate to or arise in course of the winding up of the company. In the absence of a provision like Se....
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....ly different, in Section 446 (2) (d), the words "any other question whatsoever" and "which may relate to or rise in course of the winding up of the company" have been used. When one draws a parallel between Section 11 of NCMEIA and Section 446 (2) (d) of the Companies Act, 1956, it would show that the provisions of Section 446 (2)(d) are of much wider import than the provisions used in Section 11 (f) of NCMEIA. Paragraph 14 and 19 of Sisters of St. Joseph of Cluny (Supra) read as under : 14. Section 11 has been amended since the enactment of the 2004 Act as follows: ................... Functions of Commission.­ Notwithstanding anything contained in any other law for the time being in force, the Commission shall­ ................. (f) decide all questions relating to the status of any institution as a Minority Educational Institution and declare its status as such; ............... 19. Secondly, Section 11(f) is a very wide provision which empowers the NCMEI to decide all questions relating to the status of an institution as a minority educational institution and to declare its status as such. The expression "all questions" as well as the expression "relatin....
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....ansfer, inter alia, leasehold rights of the company under liquidation for the unexpired period of lease and the Company Court has the jurisdiction and the powers to issue all necessary, ancillary and incidental directions so as to effectuate the main power contained in Section 457 (1) (c) of the Companies Act 1 of 1956, read with other enabling provisions of the Act. The Court held that the Company Court has jurisdiction to issue necessary directions to one and all in respect of matters interlinked with the disposal of the property of the company under liquidation by the Official Liquidator with the sanction of the Court. The Court did not consider the provisions of Section 446 (2) and it appears that it was not argued. The facts in MIDC V/s. Mahendar Wadhwani (Supra) though were not very similar it still has relevance to this matter. In that case, one Gannon Dunkerley and Co. Ltd. had offered to purchase all the assets of the company in liquidation alongwith the leasehold interest of the company under liquidation in respect to certain MIDC plots. MIDC was pleased to grant its consent for transfer of the lessee's interest in those plots without charging any amount of additional....
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...., which has no application at all to this proceeding. It is contended that the State Bank of Hyderabad being a secured creditor was outside the winding up proceedings and respondent No. 1 as a third party is unconcerned with the winding up proceedings herein. 24. Hence, Section 446 (2) (d) of the Companies Act, 1956 is a very wide provision to empower the Company Court to decide all questions, which may relate to or rise in course of the winding up of the company. This power is bolstered by provisions of Section 456 and Section 457 of the Companies Act. The issue as to whether MIDC is entitled to any of the charges, viz., differential premium or extension charges and whether the transfer is a formal transfer or non­formal transfer certainly relates to and rises in the course of the winding up of the company. Though the property had been leased to the company (in liquidation), the leasehold rights in the property belong to the company and therefore, it is in the custody of the Liquidator, who had infact taken possession and under Section 457, Official Liquidator in a winding up by the Court has power, of course with the sanction of the Court, to sell the leasehold rights. Sin....
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....itted on recovery of the 30% of the differential premium. 2.A. "Differential Premium" in respect of land shall mean the difference between the occupancy premium amount for the plot calculated at the land rates prevalent at the time of receipt of the application of the transfer by the Corporation and the amount calculated at the land rates prevalent at the time of initial allotment in favour of the transferor. The Board of MIDC by its resolution no.3314 passed on 18th April 1998 approved the revised transfer guidelines set out in the above circular. The said resolution contains a statement which provides a description of transfers and whether such transfers constitute formal or informal transfers. Item (m) of the said statement provides as follows: Sr.No. Description As per existing guidelines As per proposed guidelines m) i) Involuntary transfer by operation of law viz. Amalgamation of Companies. ii) Amalgamation/Restructuring/Merger occasioned as per BIFR orders Formal transfer Formal transfer 27. MIDC brought out another circular dated 12th December 2011 as it felt that there was an ambiguity in Clause 3 of the 1998 circular and it introduced t....
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....DC demanded 30% differential premium for the transfer. This was challenged in this Court by way of writ petition under Article 226 of the Constitution of India. 31. The Court came to a conclusion that the circular dated 12th May 1998 issued by MIDC provided for transfers in two categories, viz., formal transfers and non­formal transfers and as the plot was put to auction by the Bank of Baroda in execution of the recovery certificate that it got from DRT and M/s. Colour Tech had voluntarily opted to participate in bid, Clause 3 of the circular dated 12th May 1998 will not apply to the transfer and the transfer cannot be said to be an involuntary transfer. It should be noted that when a property is sold based on a recovery certificate issued by DRT, the sale is conducted by the secured creditor and the sale proceeds actually go to the mortgagor or the company and the creditor appropriates the sale proceeds in satisfaction of its claim against the debtor. The debtor, i.e., the company or lessee is still in existence and it gets credit for the sale proceeds. In our case, the lessee, viz., the company is in liquidation and it is not the company that is receiving the sale proceeds....
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.... Bank, which was ordered to be wound up and in that winding up proceeding, the Court appointed Official Liquidator, who sold the tenancy rights in favour of one S.N. Jain. The sale was confirmed by the High Court and the said S.N. Jain took possession of the premises. The landlord filed a petition for eviction of Laxmi Bank and the High Court held that as the transfer in favour of S.N. Jain by Official Liquidator was confirmed by the Court, he acquired the status of the tenant by operation of law and therefore, the transfer of the tenancy rights was an involuntary transfer and the provisions of Section 14 (1) (b) of the Delhi Rent Control Act would not be attracted. Reversing the judgment, the Apex Court held that Official Liquidator had merely stepped into the shoes of Laxmi Bank under the orders of the Court which was on behalf of the original tenant - S.N. Jain. It was further held that the sale was a voluntary sale, which clearly was within the mischief of the section and assuming that the sale by Official Liquidator was an involuntary sale, it undoubtedly became an assignment as provided by Section 14 (1) (b) of the Act. 34. Therefore, the Apex Court was interpreting the pr....
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....ts was an involuntary transfer and the provision of Section 14(1)(b) of the Act would not be attracted. Reversing the judgment, this Court held that the Official Liquidator had merely stepped into the shoes of Laxmi Bank which was the original tenant and even if the Official Liquidator had transferred the tenancy interest to S.N. Jain under the orders of the Court, it was on behalf of the original tenant. It was further held that the sale was a voluntary sale, which clearly was within the mischief of the Section, and assuming that the sale by the Official Liquidator was an involuntary sale, it undoubtedly became an assignment as provided by Section 14(1)(b) of the Act. The Court further held that the language of Section 14(1)(b) is wide enough not only to include any sub­lease but even an assignment or any other mode by which possession of the tenanted premises is parted and the provision does not exclude even an involuntary sale. 35. Further the Apex Court did not say that it was a voluntary sale because the Court also went ahead and said assuming it was an involuntary sale, still it would be hit within the mischief of the section. Section 14 did not have any separate categ....
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....ential premium would be payable on the same. Since mergers or amalgamations or similar arrangements under Section 391­394 of the Companies Act had the effect of transferring the leasehold rights from the target company to the acquiring company, MIDC found (and it was also their policy) that such arrangements which eventually require sanction of the court, were considered formal transfers and accordingly, no differential premium was payable. Since such arrangements were otherwise in the ordinary course of business (in that the companies to the merger were going concerns and the merger/demerger was for economic/commercial reasons) and were undertaken to obtain a specific commercial advantage, the circular dated 12th December 2011 was issued stating that voluntary arrangements under Section 391­394 of the Act would be categorised as non­formal transfers on which differential premium is liable to be paid. The underlying rationale would appear to be that simply because a court sanction is necessary to give effect to such a scheme of arrangement should not deprive MIDC of its legitimate revenue on such transfer, which is, in effect, a voluntary transfer between parties at arm....
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....BIFR/AAIFR etc. shall be permitted on recovery of the standard transfer charges and not differential premium. If transfers pursuant to DRT orders are formal transfers, where the company whose assets are transferred is still a going concern, is one more circumstance in support of the position that transfers of MIDC land as part of winding up are also formal transfers. 42. In the circumstances, as I am holding that a sale by Official Liquidator pursuant to orders of the Court will be formal and involuntary transfer, MIDC will not be entitled to any differential premium but only to standard transfer charges. 43. To Shri Chawan's submissions that this Court cannot decide what would be the premium or only a Civil Court can hear after MIDC passes an order on a transfer application, I am not deciding the quantum. I am only deciding whether differential premium is chargeable or not and I have said it is not. Once this is done, certainly it will be easier to liquidate the assets of the company. EXTENSION CHARGES : 44. It is MIDC's case that as per circular no.B­73864 dated 10th June 2013 in case of formal and non­formal transfer, if the time limit for development....
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.... made on 24th November 1994 and 11th January 1995. MIDC executed an Agreement to Lease with the company (in liquidation). The second plot bearing No.A/26/2/2 was alloted on 20th June 1995 to the company and on 16th April 1996 MIDC executed a pre­determined Lease Agreement in respect of the said plots. The company came to be wound up on 22nd January 2008. For almost 14 years when the agreement required completion of building and structure within 36 months, MIDC did not even lift a finger. MIDC slept over the whole thing. After the company was ordered to be wound up and Liquidator took possession of the said plots and issued advertisements in the newspapers, MIDC still did not come forward to lodge its claim but for reasons best known to MIDC started communicating with the company, which had already been ordered to be wound up, on the completion certificate for the buildings. First of such letter is dated 16th May 2008 whereby MIDC called upon the company to submit the certificate on or before 31st December 2008. 49. Shri Chawan relied upon the provisions of the MIDC Act 1961 and MIDC Disposal of Land Regulations 1975 to explain the Court the aim and objects of the Act and the....