TaxTMI 
TaxTMI 
2018 (10) TMI 120
X X X X Extracts X X X X
X X X X Extracts X X X X
....d leased out by erstwhile Gwalior State to the Jiyajeerao Cotton Mills Ltd. Birla Nagar, Gwalior / M/s Birla Brothers has been negatived. (2) Relevant facts leading to the controversy are that M/s Jiyajeerao Cotton Mills Ltd (for short "J.C. Mills") a company registered under the Companies Act moved an application under Section 439 of he Companies Act, 1956 (in short Companies Act) for winding up of the company in view of the opinion expressed by Board for Industrial and Financial Reconstruction recorded in its proceedings dated 23.01.1995 as the company was unable to pay its dues. (3) In the winding up proceedings the State of Madhya Pradesh through the Officer-in-charge moved an application on 19.12.1997 pointing out that the land on which the J.C. Mills and its other buildings are situated belongs to the State of Madhya Pradesh being successor of erstwhile Gwalior State which had granted pattas of the land only for the purpose of establishing the Mill providing specially that, as soon as the Mill will be closed or will not function the land will revert back to the State. Vide said application leave was sought for impleadment in the liquidation proceedings. (4) Another a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assets of the company realised as soon as possible so that from the amount realised from the sale of these assets the dues of the workmen even on pari passu basis can be paid, as provided under section 529-A of the Indian Companies Act to avoid atleast partially the sufferings of the unfortunate workmen their families. The Apex Court also indicated that it should be found out whether there are any liquid assets and raw-materials which can be immediately disposed of. The Apex Court also indicated that it would be appropriate to direct ad hoc payment in the meantime, to the starving workmen and their families. 26. Considering the facts and circumstances brought on record including the observations of the Apex Court, referred hereinabove, further directions are hereby issued as indicated here under:- (A) The petitioner-company shall hand over the custody of the shares and debentures, details whereof have been furnished in Annexure-6 to the list of Assets and liabilities filed by it alongwith the affidavit dated 2-2-1998 together with the assets including Fixed deposit receipts etc., details whereof have been furnished in the Annexure-8 to the aforesaid list to the Liqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this Court and no such decree will be executable without prior permission of this Court. (7) Evidently, while allowing the continuance of the Civil Suits filed by respective creditors, the Company Court did not pass any order on the application filed by State Government for reverting of the immovable property in question. (8) As no decision was taken by the Company Court and the official liquidator after receiving inventories proceeded to take recourse to auction of the immovable property in question, the appellant State of Madhya Pradesh filed an application claiming therein that the land on which company was being run belongs to the State Government and the land cannot be auctioned for recovery of dues of the company. Similar rights were asserted by the GRASIM Industries, CIMMCO Birla, J.C. Mills Educational Institutions Managing Society claiming exclusive rights over the property in their possession. (9) Dwelling upon the contention of respective applicants the Company Court dismissed applications filed by State of Madhya Pradesh, GRASIM, CIMMCO, J.C. Mills Educational Institutions Managing Society by impugned order dated 05.11.2004 holding: "16. Having heard the ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for setting up of a factory. (12) The conditions of lease dated 24.02.1921 have been adverted to bring home the submission that the lease was granted for the purpose of setting up of factory and in case the factory is closed the land to revert to the State/Ruler. The conditions of lease relied upon are extracted for ready reference:- (13) It was urged that since the company has gone in liquidation the purpose for which the land was allowed being frustrated deserves to be reverted back in absence of any term to the contrary. It was urged that the clause for reversion of land by the State was because after the merger of the Gwalior State in the State of Madhya Bharat and the successor State of Madhya Pradesh, all rights, title and interest which vested with the Gwalior State were succeeded by the State of Madhya Pradesh. It was urged that the land should revert back to the State Government and the possession of the land in question be delivered to the State. It was also contended that it was a grant made by the Gwalior State. Under Section 3 of the Government Grant Act all the provisions, restrictions, conditions, and limitations contained in the grant or transfer shall remain ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....immco Birla Limited, JC Mills Education Society and D.P. Mandeliya it was was argued that the land will not revert back to the State Government. On the land building, plant, machinery etc were established. There is no closure of the industry and after the merger of the State the company will be governed by the laws framed after independence and under that law they have acquired absolute right over the lands and these lands are the property of the company, which cannot be sold by liquidation. It is also argued by them that certain other property has been purchased by the company and Government cannot claim those lands which have been purchased by the company. (15) It is urged that the Company Court without dwelling on the issue raised and the fact that the grant was not absolute and no fundamental right existed in favour of the lessees, negatived the claim of the State, which deserves to be set aside and the lease hold land be directed to be handed over to the State of Madhya Pradesh and the official liquidator be prohibited from causing auction of the land in question. (16) A cross-objection at the instance of one Harshit Textiles, a company registered under the Companies Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the following terms:- "3. When the agreement was concluded, the position of the State of Gwalior was of a State under the British suzerainty. That position was altered by the Indian Independence Act, 1947, which came into force on 15th August 1947. With the coming into force of this Act, the British paramountcy over the Indian States lapsed and the State of Gwalior, like other Indian States, was released from its obligations to the British Crown. Section 1 of the Act of 1947 set up as from August 15, 1947, two independent dominions to be known as India and Pakistan. The Government of India Act, 1935, was modified under the provisions of the Act of 1947 and the orders issued under Section 9 of the Act. The Act of 1935, as so modified, provided by Section 5 that the Dominion of India established under the provisions of 1947 Act shall comprise of the Governors' Provinces, Chief Commissioners' Provinces, the Indian States as might accede to the Dominion under Section 6, and any other areas that may, with the consent of the Dominion, be included in it. In pursuance of this section, the Ruler of Gwalior executed on 15th August 1947 an instrument of Accession. It is well kn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, declared that the Constitution of India, as adopted by the Constituent Assembly of India, shall be the Constitution for Madhya Bharat and shall be enforced as such in accordance with the tenor of its provisions and that the provisions of the said Constitution shall as from the date of its commencement supersede and abrogate all other constitutional provisions inconsistent therewith which were then in force in the State. The Constitution of India came into force on 26th January, 1950. Article 295(1)(b) of the Constitution of India, which provides for the succession to property, assets, rights, liabilities and obligations of an Indian State corresponding to a State specified in Part B of the First Schedule, runs as follows: "(1). As from the commencement of this Constitution (a) ..... (b) all rights, liabilities and obligations of any Indian State corresponding to a State specified in Part B of the First Schedule, whether arising out of any contract or otherwise, shall be the rights, liabilities and obligations of the Government of India, if the purposes for which such rights were acquired or liabilities or obligations were incurred bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment. Transfer of property was was not objected by Government. Thereafter possession of J.C. Mill continued over the said land. When J.C. Mill transferred its land to GRASIM and CIMMCO, the said transfer was not objected by the State Government. Thereafter, now State Government is estopped from their conduct in claiming the said land." In our considered opinion, learned Single Judge while making the observation glossed over the fact that the right in M/s Birla Brothers was that of the lease and no absolute right devolved in them. Therefore, what was created in favour of J.C. Mills, GRASIM and CIMMCO and other transferees in course, was the lease right and not the title in property. It is held in "Bejoy Gopal Mukherji Vs. Pratul Chandra Ghose [AIR 1953 SC 153]": "4. .... Mere possession for generations at a uniform rent nor construction of permanent structure by itself may not be conclusive proof of a permanent right as held in A.I.R. 1929 Cal. 87 [H] (supra) ......" (21) Again in "Hamidullah (dead) by his legal representatives and others Vs. Abdullah and others [AIR 1972 SC 410 (413)]", it is observed : "17. .... In every case an inference of permanency of tenancy is a que....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the duty of the lessee to deliver up possession of the demised premises to the lessor. If the lessee or a sub-lessee under him continues in possession even after the determination of the lease, the landlord undoubtedly has the right to eject him forthwith; but if he does not, and there is neither assent nor dissent on his part to the continuance of occupation of such person, the latter becomes in the language of English law a tenant on sufferance who has no lawful title to the land but holds it merely through the laches of the landlord. If now the landlord accepts rent from such person or otherwise expresses assent to the continuance of his possession, a new tenancy comes into existence as is contemplated by Section 116, Transfer of Property Act, and unless there is an agreement to the contrary, such tenancy would be regarded as one from year to year or from month to month in accordance with the provisions of Section 116 of the Act." At page 272 it was pointed out : "It can scarcely be disputed that the assent of the landlord which is founded on acceptance of rent must be acceptance of rent as such and in clear recognition of the tenancy right asserted by the person who p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herwise at the time of winding up order the property belonged to the Mill and after its possession is taken over by the official liquidator, the property of the company is under liquidation under the law". While making such observation, in our humble opinion, learned single judge glossed over the fact that during liquidation proceedings, the State of Madhya Pradesh through its functionaries had filed an application that they are the owner/lessor of the property in question. However, the company court without dwelling on the same passed the liquidation order. The official liquidator on receiving the inventories since proceeded to put on auction the land in question, in our considered opinion, it was well within the right of the State to have moved an application for determination of their right over the property. (24) Sub-Section (2) of Section 446 of the Act of 1956 stipulates : "446. (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or aga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Section 456. Section 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 file suits. To avoid this eventuality and to keep all incidental proceedings in winding up before the court which is winding up the company, its jurisdiction was enlarged to entertain petition amongst others for recovering the claims of the company. In the absence of a provision like Sec. 446 (2) under the repealed Indian Companies Act, 1913, the official Liquidator in order to realise and recover the claims and subsisting debts owed to the company had the unenviable fate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 sub-section (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 under section 483 to the same court to which and in the same manner in which and subject to the same conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction. In exercise of this Appellate jurisdiction, the Appellate Bench entertained the appeals and directed that the winding up order shall be held in abeyance till the scheme is implemented and if any default is committed the winding up order mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms to be made under Section 446 (2) (b) of the Companies Act having regard to the provision in Section 458 A of the Companies Act 1956, observed in the context of the scope of sub-section (2) of Section 446 of the Act of 1956 that : "10.3 The jurisdiction of the Court under sub-section (2) of Section 446 of the Act commences from the date the winding up order is passed. However, it is noticed that the learned single judge of this Court in KARNATAKA LIGHT METAL INDUSTRIES P. LTD., vs PROVISIONAL LIQUIDATOR, KARNATAK STEEL AND WIRE PRODUCTS LTD., AND OTHERS has taken a view that "the expression 'is winding-up' being in the present continuous tense grammatically, provides a clue to the true intention of the Legislature which is that even before a winding up order is actually made, the Court which is seized of the proceedings can and may in its discretion entertain or dispose of any claim made by or against the company. I, therefore, see no reason to read any ambiguity in the language of sub-section (2) of Section 446 of the Act to construe it as acquiring jurisdiction only after the winding up order is passed." It is not possible to agree with the aforesaid view. Section 44....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the title over the land in question. And dispels the doubt as to whether it was within the competence of the Company Judge to have entertained the application on merit. (28) To conclude, when the impugned order is tested on the anvil of above analysis, it cannot be given the stamp of approval. Consequently, it is set-aside. Application filed by the State of Madhya Pradesh claiming to be the owner of the immovable property in question, being the successor of erstwhile owner, is allowed. It is held that the lessee and subsequent transferee from the original lessee did not incur absolute right and title in the immovable property in question. In other words, they continue to remain as lessee. And the object for which the land was leased out being frustrated, on winding up of the company in question; the land leased out to it stands reverted to its owner, the State of Madhya Pradesh. As a consequence whereof, it is held that the official liquidator has no right to auction the leased property in question. (29) The appeal is allowed in above terms. However, there shall be no costs. ============= Document 1 “A (1) आराजी गैर à....
X X X X Extracts X X X X
X X X X Extracts X X X X
....¤à¥‡ इसà¥à¤¤à¥‡à¤®à¤¾à¤² | कारखाना दी जाती है लगान कसद वकसद अदा करना होगा। | मà¥à¤¯à¤¾à¤¦ पटटा ताकायमी कारखाना है । 3. आराजी गैर दखिलकार है वासà¥à¤¤à¥‡ इसà¥à¤¤à¥‡à¤®à¤¾à¤² कारखाना दी जाती है मà¥à¤¯à¤¾à¤¦ तकायमी कारखाना तय लगान कसत वकसत नमà¥à¤¬à¤° 243 व 242 में हà¥à¤† है वह वासà¥à¤¤à¥‡ इसà¥à¤¤à¥‡à¤®à¤¾à¤² à....