TaxTMI 
TaxTMI 
2025 (12) TMI 1830
X X X X Extracts X X X X
X X X X Extracts X X X X
....cise jurisdiction to decide the prayers sought by the Official Liquidator in exercise of its power under section 446(2) of the Companies Act 1956. The Appeal, therefore, seek quashing of the impugned order. 2. We have heard learned senior counsel Mr. Prashant Chawan for the MIDC. The respondent, M/s. Metal Tubes and Rolling Mills, (in liquidation), and the Official Liquidator, Bombay High Court, are represented by learned Senior Counsel Mr. Sharan Jagtiani, being assisted by Mr. Muttahar Khan. Before we appreciate the rival contentions advanced in the Appeal, we would briefly like to have reference to the background in which the impugned order came to be passed. By order dated 22/1/2008, Official Liquidator was appointed as a liquidator of M/s. Transpower Engineering Limited, (for short M/s.Transpower), and he placed a report before the Company Court in form of Liquidation Report No. 466/2016 in Company Petition No. 606/1998, dealing with the liquidation of M/s. Transpower. The report of the Official Liquidator involved two plots bearing number A-26/3 admeasuring 64,569.50 sq.mts, and plot number A-26/2/2, admeasuring 22,879 sq.m situated at MIDC Butibori Industrial Area, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A 26/3 on 29/4/2011. 4. In liquidation process, an order was passed by the High Court on Company Application No.583/2011, inviting claims from workers/creditors under Rule 148 of the Company Rules 1959 and 285 claims were received by Official Liquidator. In January 2013, Official Liquidator fixed the sale of MIDC plots by fixing reserve price and one Gold Chip, was granted time to make the payment, as it made an offer above the offset price, which was accepted and approved by the Court. When Gold Chip took out the application seeking conveyance and possession of the plots, or alternatively, refund the purchase price, the Official Liquidator took out an application in respect of MIDC demands, and submitted a report, inter alia, seeking direction regarding payment of MIDC charges and waiver for reduction. At this stage, MIDC informed that the lease was terminated by it, as the Company had failed to complete the factory building, and it even raised an objection on the jurisdiction of the Company Court to decide the issue of MIDC charges. The Company Court directed the Official Liquidator to execute the transfer documents in favour of Gold Chip, and Official liquidator also calle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were allotted to the Company on agreement to lease, subject to certain stipulations, which categorically provided that if there is non-compliance of the said conditions, i.e. non-completion of construction within the stipulated timeline, it shall entail two consequences; (i) payment of extension charges for completion of construction, or (ii) cancellation of lease. According to him, the lessee or any entity stepping into the shoes of lessee, which may include the Official Liquidator of a company, is bound by the terms of lease in respect of all its covenants, including payment of rent, utilisation of lease property, transfer of leasehold interest, etc. 8. Inviting our attention to the power vested in the MIDC under Rule 29 of the Maharashtra Industrial Development Corporation (Disposal of Lands Regulation), 1975, framed under Section 64 of the MIDC Act, he would invoke Rule 29 which provide that the Corporation may permit the lessee to transfer his plot on such terms and conditions as it may decide from time to time, and it may also permit a lessee to sublet it on such terms and conditions, including payment of additional premium as the Corporation may deem ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s.Parasram Harnand Rao Vs. M/s.Shanti Prasad Narinder Kumar Jain and Anr (1998) 3 SCC 565, as well as a decision in Delhi Development Authority Vs. Nalwa Sons Investment Limited & Anr. (2020) 17 SCC 782,. He has also placed reliance upon the decision in case of Singer India Ltd. Vs. Chander Mohan Chadha (2004) 7 SCC 1, and the decision of this court in M/s. Colour Tech Coating (I) Pvt. Ltd. Vs. Maharashtra Industrial Development Corporation & Ors. WP No. 2288/2014 where a Division Bench of this Court had approved the demand made by MIDC for payment of 30% differential premium as condition of transfer. Relying upon the aforesaid decisions, it is urged before us that transfer of leasehold interest by a Company as a lessee through Official Liquidator is not a non-voluntary transfer, since winding up of the company is dependent on acts of the company, and when the lessee Company goes into liquidation, and the leasehold interest, being asset of the Company in liquidation is transferred, it would be subject to Rule 29 of MIDC rules as well as the circulars issued by MIDC regarding charging of transfer premium. Relying upon M/s. Parasram Harnand Rao (supra) Mr. Chawan has urged befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ni has placed reliance upon the decision of the Apex court in case of Sudarsan Chits (I) Ltd. Vs. O. Sukumaran Pillai & Ors. (1984) 4 SCC 657 which has traced the historical evolution of Section 446(2) and it is held that upon a winding up order being made, an Official liquidator being appointed as a liquidator of the company, he has to take into his custody the company property as per section 456 and the Section confers power upon him to sell the properties, both movable and immovable, and to realise the assets of the companies with the purpose of distributing it amongst the claimants. The purport of bringing the proceedings under one umbrella, according to Mr. Jagtiani, is highlighted by the Apex Court in the following words in the wake of the statutory scheme, "Now at the 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 absenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re of permission, shall be permitted on recovery of standard transfer charges. 13 Referring to the modified transfer guidelines dated 12/12/2011, it is the submission of Mr. Jagtiani that the existing clause underwent a change and the transfers pursuant to any order/ scheme of Company Court/Tribunal/appropriate Government/ BIFR/AAIFR were classified as 'involuntary transfers' to be permitted on recovery of Standard Transfer Charges and not differential premium. With the clarification offered in the circular dated 12/12/2011, according to Mr. Jagtiani, in contrast, any amalgamation, takeover, merger or de-merger etc. framed between two or more entities in the ordinary course of business as part of their corporate/business strategy and if sanction is received to such scheme, it is directed that it shall not be treated as formal transfer, and the same shall be permitted on recovery of differential premium. According to Mr. Jagtiani, the clarification covered a scenario where a healthy company adopt a scheme of amalgamation / takeover / merger or de-merger in the ordinary course of business as a part of the business strategy and this happens by way of choice. In contrast, accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5. We have considered the rival submissions advanced in the backdrop of the order dated 26/7/2018 passed by the learned Single Judge Justice K.R. Sriram, J (as his Lordship then was.) MIDC is a statutory Corporation established under MIDC Act, 1961 which has set out its powers, duties and obligations and this include its power to acquire land and dispose the land. While MIDC discharges this statutory function, it is also empowered to levy distinct charges, including transfer charge, differential charge, extension charges etc. and for this purpose, it has framed guidelines upon the Board of the Corporation passing a resolution approving the said guidelines and on obtaining the approval of the State Government. MIDC allotted two plots to Transpower Engineering and executed agreement to lease with the said Company, which imposed a restriction on any assignment of the demised premises without previous permission of the Chief Executive Officer of the MIDC, who is also conferred with a discretion to refuse the consent or grant the same, subject to such conditions as he may think fit. The lease agreement permitted MIDC, the lessor to collect the arrears for the lease rent of 30 days wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....016. 16. The Official Liquidator, however, faced difficulty as MIDC permitted transfer to the purchaser only upon payment of transfer charges and staked claim for differential premium for plot A-26/3 to the tune of Rs. 2,48,43,200/- and plot A-26/2/2 to the tune of Rs.88,02,700/-. It also claimed extension charges of Rs. 4,38,98,098/- from the Company for transfer of the plot by relying upon the Circular dated 10/6/2013, on the ground that in case of formal or informal transfers if the time limit for development of plot has been exhausted, and the plot has not been developed, then the plot shall not be permitted to be transferred without recovery of extension charges, as the MIDC did not indicate the basis and though it admitted that a Competent Court has a power to waive the recovery of extension charges, it adopted a stand that the Company Court is not a competent Court to waive the extension charges, as MIDC Act, 1961 along with MIDC Disposal of Land Regulations 1975, is a complete Code and the circulars/orders issued by MIDC for transfer/extension/services charges, etc. issued under Regulation 29 of the Regulations, are not amenable to challenge before the Company Court. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the whole of the undertaking of the Company as a going concern. The Official Liquidator in the process of winding up shall make a report to the Company Court as stipulated under Section 455 from time to time, which include the submission of a preliminary report and also seeking any inquiry as to any matter relating to the winding up process. 18 Section 446 of Companies Act contemplate that when a winding up order has been made or the Official Liquidator has been appointed, any question which may relate to or a rise in the course of winding up of the Company, shall be decided by the Company Court and the proceedings of winding up shall be continued under its directions. The Company Court, therefore, has jurisdiction to entertain the proceedings enumerated under sub-section (2) of Section 446, and if and when any issue is raised by the Liquidator in relation to a Company which is under liquidation, for which the Official Liquidator is appointed, it will be the Company Court which shall exercise the jurisdiction. The liquidator upon his appointment, shall take into his custody and under his control, all the property to which the Company is or appears to be entitled and even t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chaser, considering that amount bidded by him was lesser than the charges of transfer, requested for his money back and that is when the Official Liquidator deemed it appropriate to approach the Company Court. We, therefore, see no reason for the Company Court not exercising its jurisdiction and issuing appropriate directions upon the report being filed by the Official Liquidator in form of OLR No. 466/2016/LIQ.IX 20. Coming to the merits of the matter, as to whether the MIDC is entitled for differential premium and the extension charges, we must turn to the circular of MIDC in form of transfer guidelines which came into effect from 18/4/1998. As per the guideline of 12/5/1998, the formal categories of transfer covered "all involuntary transfers" including amalgamation, de-merger, etc. under the directions of the Competent Court/Tribunal/appropriate Government not being in nature and they were permitted on recovery of transfer charges. The formal category as per the circular, therefore, included involuntary transfers as opposed to voluntary transfers. The following transfers were set out by the circular as transfers arising of :- "1 Inducting individual not being ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ator, the name of the Company is erased from the register of Companies, i.e. the Company is officially closed. 22. The process of winding up can be voluntary when members or creditors initiate the process, if the Company is solvent and the Directors declare this followed by a Resolution. However, when the Company is ordered to be wound up by a Court or Tribunal, it is often on account of insolvency/legal violation or its inability to pay debts or on such grounds as the Court deems it just and equitable and a Company can be wound up upon a petition being filed by its creditors including other Company. Admittedly, in the present case, the liquidation of M/s. Transpower Engineering Ltd, is a compulsory winding up, upon the order passed by the Company Court directing it to be wound up. 23. The circular of 2/12/2011 was amended and in particular, changes were effected in clause of formal categories of transfer in the existing transfer guidelines dated 12/5/1998, and said circular read thus :- "3. a) "All involuntary transfers pursuant to any order/scheme of the Competent Court/Tribunal/appropriate Government/ BIFR/AAIFR etc. shall be permitted on recovery of the standard ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision is taken as a business strategy to effect a change over by its amalgamation or take over or merger or de-merger. In contrast, when a Company is in liquidation, it is not a voluntary act, but an compulsion, as the Company is unable to run in its ordinary course of business and clear its debts and therefore, warranting it to be wound up to realise its assets and distribute it to the creditors. The liquidator sell the Companies assets to raise funds, which are then used to clear the debts and liabilities and if any money remains, it is distributed amongst the shareholders. 25. A comparison between the process adopted by Board of Industrial and Financial Reconstruction (BIFR)/ Appellate Authority for Industrial and Financial Reconstruction (AAIFR), in accordance with the Sick Industrial Companies, Special Provisions Act, 1985, is a somehow comparable scenario as the Act of 1985, take care of the ill-effects of sickness of industrial companies. The Act makes special provisions with a view to secure timely detection of sick and potentially sick industrial companies and the speedy determination by a Board of Experts of the preventive, ameliorative, remedial and other measures in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....extension charges, as in the wake of the Circular dated 10/6/2013, the Competent Court may order that such extension charges shall not be paid even if the time limit for development of the plot has been exhausted and we deem it appropriate to leave to the Official Liquidator to determine so, when the MIDC raises its claim for extension charges in accordance with the rules determining the priority and claim. 27. Reliance placed by Mr. Chavan on the decision of M/s. Parasram Harnand Rao (supra) as well the decision of Singer India Limited (supra) is of no succour to the case of the MIDC in absence of any distinction being drawn between the voluntary and involuntary transfer. In Parsaram (supra), the Court was dealing with the winding up of tenant Bank and when the Official Liquidator sold the tenancy rights to a respondent, in the background that the landlord's suit for eviction of the tenant Bank under the Delhi Rent Control Act was decreed, but the Bank's suit for declaration that it was tenant of the landlord was dismissed for non-prosecution. When the subsequent Suit was filed by the Bank under Section 25 of the Delhi Rent Control Act, 1958 for recalling of warrant of possessi....