TMI Blog1987 (6) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... l averments contained in the affidavit filed in support of the above application are as follows : A lease agreement was executed between the director of Brunton and Company (Engineers) Ltd. (in liquidation) and the Government, covering 1.35 acres of land in Sy. No. 8/9/2 and 1173 in Fort Cochin for a period of 50 years from May 1, 1954. This lease deed was only in continuation of an earlier lease deed executed in 1864 by the then District Collector of Malabar and Brunton and Company (Engineers) Ltd. for a period of 99 years. One of the conditions in the lease deed was that the lessee will not, within the period of lease, sublet or otherwise part with the land demised or any part thereof without the permission in writing of the District Collector within whose jurisdiction the land is situated. The lessee agreed to surrender the land on termination of lease peacefully. The lessee-company is now defunct and liquidation proceedings are pending before this court. The administration of the lessee-company is carried on by the liquidator appointed by this court. The official liquidator has been making regular payments of rent to the Government. Since the company is defunct, the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company, the official liquidator is entitled to sell and realise the money. He also contended that clause 2(3) of the lease agreement prohibits only voluntary sale by the company and will not apply to a sale under orders of this court in the course of the winding up in his capacity as the representative of the general body of creditors including a large number of workers in whose favour a statutory charge is created by section 529A of the Companies Act. He also drew the attention of the court to clause 3 (3) of the agreement which provides that when the lessees shall be required to surrender any portion of the land leased to form a public road or for some other public purpose of the Government under clause 2(6), they shall be entitled to compensation for the land surrendered to be settled by mutual agreement between them and the Collector or by an award of the arbitrators mentioned therein. In the counter-affidavit filed on behalf of the Canara Bank, it was contended that in view of the fact that substantial rights of the body of creditors are involved, the Collector cannot arbitrarily or unreasonably refuse to grant permission even if this court is inclined to take the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment Pleader argued that the lease created under exhibit A-2 is not alienable but only heritable and that rule 15(2) being a statutory rule, should prevail over all agreements regarding assignment of land. Sri Govinda Warrier, learned counsel for the Canara Bank, countered his argument by inviting our attention to rule 1A of the Kerala Land Assignment Rules. Rule 1A deals with exemptions and sub-rule ( i ) of rule 1A provides that nothing contained in the rules shall apply to or affect lands situated within the limits of a corporation, municipality or cantonment, or within such other areas as the Government may, by order, specify. So also sub-rule (5) of rule 1A provides that the rules shall not apply to Government lands held under any special agreement with the Government In view of the above provisions, it is clear that the provisions of the Kerala Land Assignment Rules are not applicable to exhibit A-2 lease agreement and for this reason, we hold that the contentions raised by the learned Government Pleader on the basis of sub-rule (2) of rule 15 of the Land Assignment Rules cannot be accepted. We will now examine whether the sale is bad, illegal, or beyond the competence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Learned counsel for the Canara Bank has brought to our notice a recent decision of the Calcutta High Court in Kailash Financiers ( Calcutta ) Pvt. Ltd. (In Liquidation), In re [1982] Tax LR 2439, and also another decision of the Allahabad High Court in West Hopetown Tea Co. Ltd., In re [1890] ILR 12 All 192. Both these cases related to assignments in breach of covenants in winding up proceedings. In the latter case, West Hopetown Tea Co. Ltd., In re, the Allahabad High Court observed as follows (at page 197) : "This was an application on behalf of the liquidator of the West Hopetown Tea Company Limited, for sanction under section 144 of the Indian Companies Act to sell the movable and immovable property of the company by private contract with power to transfer the same to any person or company either as a whole or in separate lots. The application is objected to by Mr. Alston, who appears on behalf of the trustees of a deed of trust of the 11th September, 1885, and by Mr. Mullaly on behalf of Mr. Hay, one of the shareholders of the late company. Mr. Alston's objection is that the lease contained a covenant against assignment without the previous consent of the lesso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and supervision of the court and whatever he does particularly in respect of sale of the assets of the company is pursuant to the order and sanction of the court. Therefore, the court has the supreme control and say in the matter to deal with the assets and there is no prohibition in the Companies Act, 1956, and the rules made thereunder in India to interpret the provisions as to deprive the court of the power of sale of the monthly tenancy and the leasehold right which are undoubtedly and undisputedly very valuable assets in the present day, if not in some cases, it is the only asset available out of the sale proceeds of which the creditors or the contributories can be paid to some extent. Therefore, if the sale of the same cannot be effected by the court through the liquidator, it will be against public interest and thereby dishonest persons who have misappropriated the assets of the company and deprived the creditors of their legitimate dues will be benefited as in some cases the ex-directors or their nominees or their wives and relations are the landlords or the lessors. It is also sometimes that on the property of the lessor, the company has built a very valuable asset being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special leave. Relying on section 14( b ) of the Delhi Rent Control Act which provided sub-letting or assigning as a ground for eviction, it was argued that the transfer to the appellant by the official liquidator of the tenancy rights to the first respondent came within the mischief of section 14( b ) of the Act. Dealing with the question, the Supreme Court made the following observation (at page 1656) : "As regards point No. 3, the High Court relying on a decision of the Calcutta High Court in Krishna Das Nandy v. Bidhan Chandra Roy, AIR 1959 Cal 181, has found that as the transfer in favour of respondent No. 1 by the official liquidator was confirmed by the court, the status of the tenant by respondent No. 1 was acquired by operation of law and, therefore, the transfer was an involuntary transfer and the provisions of the Rent Control Act would not be attracted. After a careful perusal of the Calcutta case, in the first place it appears that the section concerned has not been extracted and we are not in a position to know what was the actual language of the section of the Bengal Act. Secondly, in our opinion, the official liquidator had merely stepped into the shoes of La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case is an involuntary sale and, therefore, is not in any way affected by the restrictive covenant contained in exhibit A-2 agreement and the consequence provided therein for breach thereof. In this case, unfortunately, the decision of the Supreme Court was not brought to the notice of the learned company judge and the learned judge did not have the benefit of the observations contained in the judgment. The view taken by the learned company judge that the sale by the official liquidator is an involuntary sale cannot be upheld in view of the above ruling of the Supreme Court. However, the above finding does not lead us to a situation in which we are required to allow the prayers in the application and cancel the proposed sale by the official liquidator and direct the liquidator to confine the sale only to the structures standing on the land and to surrender the vacant site to the Government after declaring that the lease is terminated. No sale of the land is effected and it is still open to the official liquidator to apply for necessary sanction to the District Collector. The District Collector will consider the application on merits, and dispose of the same after conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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