TaxTMI 
TaxTMI 
2026 (2) TMI 971
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....d., and the respondent as void against the Official Liquidator and for consequential cancellation of the lease agreement. The learned Company Court vide impugned order dated 21.07.2015 has dismissed the application in CA No. 826/ 2011. 3. The relevant facts for the purposes of decision in the present appeal are stated as under: i. The respondent is a Society registered under the Karnataka Registration of Societies Act, 1960 under the name "Kirloskar Institute of Advanced Management Studies" now named as "Kirloskar Institute of Management Studies"; ii. The respondent entered into a registered lease agreement dated 22.01.2000 with M/s. Mysore Kirloskar Ltd., (the Company in liquidation). Pursuant to the aforesaid lease deed, respondent was put in possession of the land bearing Survey No.22, a part of Survey No.23 and a part of Survey No.27 in Harihara Village and Taluka, Karnataka. iii. Since its execution, respondent has been paying the paltry rent of Rs. 1,250/- per month. The Company Court vide order dated 01.04.2004 ordered for winding up of Mysore Kirloskar Limited, pursuant to the petitioner in Company Petition No. 166/2001. On 29.07.2011, the Offi....
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.... disposing of the properties of the Company in liquidation. Apart from that, under the order of High Court dated 16.08.2019 passed in OLR No. 5/2019, the Official Liquidator had paid a sum of Rs. 50,52,521/- to M/s. Kotak Mahindra Bank towards an interim dividend (at the rate of 50 paisa in a Rupee) Now the Company in liquidation is having Rs. 14,01,923/- only available to the credit of the Company in liquidation. 8. The Company in liquidation is also having land of 6.29 acres in Survey Nos.22, 23 part, 27 part in Harihar Village and Taluk, measuring to an extent of 1.430 acres and 4.869 acres together with assets thereon which was leased to M/s. Kirloskar Institute of Advanced Management Studies (KIAMS), the respondent herein by the Ex-management of the Company in liquidation vide the lease agreement dated 22.01.2000 for a period of 28 years. 9. The valuable land ad measuring 6.29 acres was given on lease basis by the former Management in favour of M/S. Kiloskar Institute of Advanced Management Studies, Harihara, a related entity vide lease agreement dated 22.01.2000, just a few days prior to the filing of the petition for winding up on monthly rental of Rs. 1,250/- for a pe....
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....e Company in liquidation would not have any objection to lease out the demised premises by the lessee to any third party. The lessee, may offer the same as security to any person, firm or Company or Financial Institution to secure any borrowing arrangement. The lessee would also be entitled to enter into with such lenders and create charge in their favour for such borrowing of the demised premises. 14. In Clause 19 it is further provided that on the expiry of the term of the lease agreement, the demised premises shall be conveyed by the lessor to the lessee without any further financial or other compensation whatsoever, and the parties shall execute such documents or conveyance as would be required to transfer the absolute title over the demised premises to the lessee. Clause 19 of the lease deed is extracted hereunder: "(19) On the expiry of the term of this LEASE AGREEMENT, the subject Demised Premises shall be conveyed by the LESSOR to the LESSEE without any further financial or other compensation whatsoever and the parties herein shall execute such documents of conveyance as may be required to transfer the absolute title over the Demised Premises to the LESSEE. Upon....
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....nd 27 is concerned as per Schedule mentioned in Annexure A including lands of Sy. No.21, 22, 23 and 27 of Harihar Village and Taluk and further permit this Applicant to bid and buy these lands, in the interest of justice." 17. The learned Company Court vide ordered dated 26.07.2005 rejected the application on the statement made by the learned counsel for the Official Liquidator that the property in occupation of the applicant was not the subject matter of auction sale and therefore, the Company Court held that the relief sought for in the application would not survive for consideration and therefore, the application came to be rejected. 18. The Company Application No.188/2005 in Company Petition No. 166/2001: The aforesaid application was filed by KIAMS on 04.03.2008 under Section 457 of the Companies Act r/w Rule 9 of the Companies (Court) Rules. In Paragraph 11 of the said application, KIAMS submitted that the it would be constrained to get the property transferred into their name immediately, failing which, the Institution would not be recognized. It was also said that they were willing to pay the present market price of the said land and buy the scheduled property situ....
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....s, structures, facilities, amenities, plants and machinery on the land. A very valuable property had been transferred in favour of the applicant-Society and the such a transfer was not for valuable consideration. The learned Company Judge also took note of the fact that the official liquidator after taking control over the company in liquidation, issued notification on 28.10.2008 for sale of the assets of the Company in liquidation and sold the properties of the Company except the property held by the KIAMS and the housing quarters for a sum of Rs. 65 crores. 24. It was further held that the transaction entered into between the ex-management of the Company in liquidation and the KIAMS was not in the ordinary course of business and the encumbrance was not on good faith. Before initiating winding up proceedings, the statutory notice would have been issued to the Companies, then only winding up proceedings could have been initiated. After the receipt of the statutory notice, the lease agreement was entered into between the KIAMS and the Company in liquidation. Some clauses in the lease agreement were prejudicial to the interest of the creditors, workers and contributors of the Comp....
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....e again approached this Court in C.A. No. 188/2008 seeking direction to the Official Liquidator to sell 6 acres 29 guntas of land held by the applicant-Society and applicant to purchase the same. The said application has been dismissed by this Court on 30th September 2008. Being aggrieved by the same, OSA 27/2008 was filed by the applicant-society and the same was also dismissed by the Division Bench of this Court on 28th January 2009 observing as under: "Therefore, we do not find any reason to interfere in the impugned order passed by Learned Company Judge. More so, when Learned Company Judge has made it categorically clear that as and when land, under occupation of appellant, is put to an auction sale, it would also be at liberty to participate in the auction proceedings. This according to us serves the purpose of the appellant. There cannot be any other better method for sale of the properties belonging to company in liquidation so as to have complete transparency in the transaction. As and when land in occupation of the appellant as lessee is put to auction sale, appellant would be at liberty to participate in the said auction and in case its offer happens to be maximu....
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....nd, under occupation of appellant, is put to an auction sale, it would also be at liberty to participate in the auction proceedings. This according to us serves the purpose of the appellant. There cannot be any other better method for sale of the properties belonging to company in liquidation so as to have complete transparency in the transaction. As and when land in occupation of the appellant as lessee is put to auction sale, appellant would be at liberty to participate in the said auction and in case its offer happens to be maximum, then the same can be considered by Official Liquidator." 28. COMPANY APPLICATION No. 826/2011 in COMPANY PETITION NO. 166/2001: The Company Application No. 826/2011 in Company Petition No. 166/2001 was filed by the official liquidator under Section 446 read with 456(1) (2) and Section 531-A of the Companies Act, 1956. The learned Company Judge has dismissed the said application as mentioned above. Submissions on behalf of the Appellant/Official Liquidator: 29. The Official Liquidator has enlisted the amount dues and payable to the secured creditors, workmen and other creditors of the Company till 19.04.2024 in its written synopsis which i....
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.... the former clause would have precedence over the latter clause. The Delhi High Court has placed reliance on the judgment of the Supreme Court in the case of RAMKISHORE LAL VS. KAMALNARAYAN (1962) SCC OnLine SC 113 wherein it has observed as follows: "12. The golden Rule of construction, it has been said, is to ascertain the intention of the parties to the instrument after considering all the words, in their ordinary, natural sense. To ascertain this intention the Court had to consider the relevant portion of the document as a whole and also to take into account the circumstances under which the particular words were used. Very often the status and the training of the parties using the words have to be taken into consideration. It has to be borne in mind that very many words are used in more than one sense and that sense differs in different circumstances. Again, even where a particular word has to a trained conveyancer a clear and definite significance and one can be sure about the sense in which such conveyancer would use it, it may not be reasonable and proper to give the same strict interpretation of the word when used by one who is not so equally skilled in the art of....
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....Raghavan, learned Senior Counsel for KIAMS has submitted that under Section 531, the transfer of movable or immovable property of the Company within one year before the presentation of the petition is void against liquidator, if the transfer of the property by a Company was not made in ordinary course of its business, and if the transfer was not made in good faith for valuable consideration. He has placed reliance on judgment in VIRENDRA SINGH BHANDARI VERSUS NANDLAL BHANDARI AND SONS P. LTD. (2019) SCC OnLine MP 6437 and K.N. NARAYANA IYER VERSUS COMMISSIONER OF INCOME TAX (1992) SCC OnLine Ker 436. 34. As the transaction of lease could be said to be voidable, the limitation for seeking the relief of declaration under Article 58 of the Limitation Act, 1963, is three years from the date of the cause of action which would be execution of the document in respect of which declaration is sought. In addition, under Section 458A of the Companies Act, the benefit extended to the Companies in liquidation while computing the period of limitation in respect of any suit or application in the name and on behalf of the Company which is being wound up by the Company Court is the period from t....
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....ingly: Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months. (2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by [the Tribunal], and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual. 38. Section 532 provides that any transfer by a Company of all its property to trustees or to the benefit of all its creditors shall be void. 39. Section 531A comes in between Section 531 and 532 which provides that any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up shall be void against the liquidator. 40. Section 531 is not in the respect of ....
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.... have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid." 43. Section 533 does not speak about the transaction under Section 531A. 44. As noted above, the learned Company Judge vide a detailed order dated 14.07.2011 in Company Application No. 237/2011 in Company Petition No. 166/2001 observed that if the transaction is tainted with an element of dishonesty, the question of fraud would arise. The KIAMS is to grab 6 acres 39 guntas of land and the properties thereon. It was also held that on the date of the order, the market value of the land itself was valued at Rs.1 Crore per acre. The lease deed was not a genuine transfer. The lease deed also appears to be contrary to Section 531 of the Act and the transaction between the lessor and lessee was tainted with element of dishonesty and fraud on its creditors. ....