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TMI Blog1968 (2) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... debted to a number of unsecured creditors, so the company discussed its position with them as well as the Corporation and with the concurrence of all the creditors, it made an application to this court in July 1954, under section 158 of the then Indian Companies Act, 1913, for sanction of the scheme of arrangement annexed thereto, in order to enable the resuscitation and working of the company, rather than allow it to go into liquidation. In substance, the arrangement was that the corporation would lease the Mills to the General Fibre Dealers Ltd., Calcutta (hereinafter called "the Fibres") for a period of 10 years to start with, on a yearly rental of Rs. 2,50,000 which would be utilised for the liquidation of the debts of the company. However, that scheme could not be sanctioned because the Industrial Finance Corporation Act, 1948, did not contemplate the creation of a lease of the property held by it as a mortgagee. Subsequently, the aforesaid Act was amended in 1955 which permitted the creation of a lease of the mortgaged property by the Corporation. So another application for the sanction of the scheme of arrangement under section 391 of the Companies Act, 1956, was presented w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however that in the event of it taking more than ten years to liquidate the amount due to the Corporation, the terms of this lease shall be automatically extended by such period as may be necessary to pay the entire amount due to the Corporation." Clause 2(b) provides that the Fibres shall provide a bank guarantee in the sum of Rs. 16,75,000 for ensuring payment of rent to the Corporation regularly as and when the same becomes due. Clause 2(f) requires the lessee "not to remove the mortgaged plant or any part thereof from the mortgaged premises without the previous consent in writing of the Corporation". Clause 2(i) enjoins the lessee "to use, manage, run and work..... the mortgaged premises or any part or parts thereof in a proper and workmanlike manner and in the same way as plant, engines and machinery would usually be run and worked by a man of ordinary prudence under similar circumstances of his own plant, engines and machinery and to maintain such plant, engines and machinery in good condition and replace all such spares and accessories as may be necessary". Clause 2(n) says, "On the expiration or sooner determination of these presents to remove at its own costs all its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the lessee". It has to be remembered that the scheme of arrangement was between the creditors and the shareholders of the company. The Fibres were no party thereto. Therefore, the Fibres were bound only by the terms and conditions of the lease dated July 6, 1956 and the agreement dated July 15, 1956 and not by the scheme of arrangement as a whole. However, the provisions of the scheme can also be looked into for the collateral purpose of seeing whether it contemplated a situation when the lease was not renewed after the expiry of ten years but the dues of the Corporation and other creditors still remained unpaid. In this connection clause (15) of the scheme of arrangement may be quoted with advantage : "In case of non-renewal of the lease for any reason after the expiry of ten years any payment legally due to the creditors shall remain a charge upon the assets of the company which may be in its hands subject to the rights of the Industrial Finance Corporation as mortgagees if any then subsisting". It is also worthy of note that on December 7, 1965, a tripartite meeting was held at New Delhi in which the representatives of the company as well as of the Fibres and the Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a period of only ten years, they started removing from the Mill premises what they alleged to be their own machinery and parts. But the company considered the same to be mere replacements, so it objected to the removal of the machinery by the Fibres. Hence on February 22, 1966, the company filed suit No. 11of 1966 in the Court of the Civil Judge, Allahabad at Lucknow praying for an injunction restraining the Fibres from dismantling and removing any machinery or parts installed at the premises of the mills. The company also obtained a temporary injunction in the above terms. The result was that the Fibres stopped payment of the lease rent to the Corporation which had fallen due on March 7, 1966, pending decision of the above dispute and also because they put forward a counter-claim against the company. Nevertheless, the Fibres had no justification to withhold the payment of the lease rent to the Corporation because of their dispute with or counter-claim against the company. As noted above, the Fibres interpreted the lease to mean that it was for a fixed period of ten years certain and no more, so it stopped working the mills on July 15, 1966. On the other hand, the company and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fibres from dismantling and removing any machinery or parts installed in its premises and had also obtained a temporary injunction in the above terms. By his order under appeal the learned company judge has made the Corporation liable for the remuneration and expenses of the receiver as well as the cost of watch and ward. This is challenged by the Corporation in Special Appeal No. 985 of 1967. The principal duty of the Receiver, according to the order under appeal is to, "permit the Fibres, their duly authorised agents and workers to enter upon the mill premises and to dismantle and remove the machineries and spare parts to which they are entitled under their lease deed and the agreement with the company, and he shall likewise permit the company, its duly authorised agents and workers to remove the machineries and spare parts which have been authorised to be sold or have been authorised by this court to sell in order to pay off its dues to the Corporation". We think that in view of the above facts and circumstances, the remuneration and other expenses of the receiver should be borne by the Fibres and the company, half and half, as it was for their benefit that the receiver was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company shall be held liable to the General Fibre Dealers Ltd. for a sum of Rs. 15,000 in respect of one of those transformers together with a sum of Rs. 14,000 being the sale proceeds of two old transformers sold by the company with the permission of the court. (7)All machines and equipment that may be in the premises but which have not been mentioned above shall go to the company. (8)The General Fibre Dealers Ltd. shall be liable for the payment of municipal taxes and railway dues in respect of the period during which the lease is held to subsist. They also undertake to re-imburse the company for any amount decreed against the latter in respect of ground rent for the said period. Even after the above agreed arrangement, there remained the question of certain payments and adjustments between the Corporation and the company as also about the liability to pay the cost of watch and ward. On February 2, 1968 the Corporation filed detailed accounts in this court. Hence on February 5, 1968, the company moved Miscellaneous Application No. 795 of 1968 praying for certain directions to be given to the receiver and the Corporation and also for allowing the company to file detailed object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interpretation that the impugned document must be read as a whole, keeping in view the real intention of the parties; secondly, the various clauses of the document must be read in harmony with one another, so as to avoid conflict and contradiction, as far as possible. If there is a provision which runs counter to the main theme and object of the deed, the same should be overlooked. It is in this background that we have to judge the lease deed dated July 6, 1956. As already noted earlier, the opening clause 1 of the lease deed provides that the lessee will held the mortgaged premises for a term of ten years, commencing from the day possession of the mills is delivered to the lessee. Clause 2(n) says 1hat on the expiration or sooner determination of 1hese presents the lessee would yield up quiet and peaceful possession of the demised premises. Likewise, clause 4(e) provides that the lessee shall be entitled to dismantle, remove and take away all its additions and extensions in plant and machinery, at any time on or before the termination of these presents. The above clauses indicate that the period of the lease was a term certain, which was ten years. Similarly, clause 4(f) says t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the Corporation will have to do under the provisions of the lease". Likewise, on April 15, 1966, the Corporation wrote another letter to the company saying : "The tenure of the lease may expire in July, 1966, when the lessees will call upon us to take back the possession of the premises. . . . As for the provisions of the lease deed for the automatic renewal of the lease till the dues of the Corporation are paid off we are advised that the option for renewal of the lease rests with the lessees and the Corporation cannot insist on the automatic renewal thereof. . . . the lease will come to an end on the 15th July, 1966, and we cannot insist on the lessees for its continuation till all dues are paid off". There is yet another reason why a definite period of ten years had to be mentioned as the tenure of the lease. Section 105 of the Transfer of Property Act defines "lease" thus : "A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised.... to the transferor by transferee, who accepts the transfer on such terms". A lease, which is silent as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease period uncertain would be bad and unenforceable. However, clause 4(f), which provides for renewal of the lease for a further period of ten years certain, at the option of the lessee is quite valid, provided, of course, that some dues of the lessor still remained unpaid under the mortgage. A number of authorities both English and Indian have been cited at the Bar by the learned counsel for the parties in support of their respective contentions. But it is not necessary to mention all of them here. However, reference may be made to: (i) Halsbury's Laws of England, third edition, volume 23, page 532, Note 1189, which reads: "The duration of the term must either be fixed by specifying the number of years in the first instance or by reference to some collateral matter in itself certain or capable before the lease takes effect of being rendered certain Lace v. Chandler [1944] 1 All E.R. 305. If to a certain term the lease purports to add a term which is uncertain, it is valid only to the certain term ( a) Say v. Smith [1563] 1 Plowd. 269, 271. (b) Quynne v. Mainstone [1828] 3 C.&P. 302". (ii) It was held by a Division Bench of the Bombay High Court that if the alleged dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have still remained a sum of Rs. 39,393-5 due to the Corporation, apart from the intervening interest calculated at the rate of 5½ per cent. per annum with six monthly rests. Yet it was not said that the term of the lease would be twelve years or so. This shows that some other mode of liquidation within the stipulated period of ten years was also contemplated, as is clear from the words used in clause 2(n) which says that, "on the expiration or sooner determination of these presents". Likewise, clause 4(e) provides that "the lessee shall be entitled at any time on or before the termination of these presents, provided no rent be then in arrears, to dismantle, remove or take away all such additions and extensions in plant and machinery". These provisions further indicate that the period of the lease was ten years and no more, though it could be renewed for another 10 years, at the option of the Fibres, in case some dues of the Corporation still remained unpaid under the mortgage. Consequently we hold, though for somewhat different reasons, that the learned company judge was right in coming to the conclusion that the period of the lease was ten years and no more which e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Fibres, which was made neither under the order of the Court nor in execution of its order. In fact, the sanctioning of a scheme of arrangement by the company court is neither an enforceable order nor an executable order, but is only an order of approval of the scheme put before it. The above authorities have, therefore, no application to the instant case, as would further be clear from the discussion that follows. Section 2(d) of the Transfer of Property Act reads: "..... nothing herein contained shall be deemed to affect.... (d) save as provided by section 57 and Chapter IV of this Act, any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction...". Therefore, the two questions, which fall for determination, are: (i ) whether the lease of the mills was made by a decree or order of the company judge, and (ii) what is meant by the word "herein" as used in section 2 of the Transfer of Property Act, i.e., does it refer to the whole of the Transfer of Property Act or only to the provisions of section 2 itself ? As regards the first question it has to be remembered that only the scheme of arrangement under section 291 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n but merely an authority to the liquidators to act in such a manner if occasion should arise. Likewise, in Sankaram v. Narasimhulu A.I.R. 1927 Mad. 1 (F.B) it was held that a sale by the official receiver of the insolvent's property is not a transfer contemplated by section 2(d) of the Transfer of Property Act, simply because the court had sanctioned the sale, nor was the official receiver an agent of the court. The above Full Bench decision of 1927 was followed by a Division Bench of the Madras High Court in Kamsala Narasappa v. Hussain Sab A.I.R. 1935 Mad. 55. Coming to the second question, it was held by the Calcutta High Court in Naba Krishna Pal v. Mohit Kali Devi (1911) 9 Indian Cases 840 that the word "herein" used in section 2 of the Transfer of Property Act means "in that section" and not "in the Transfer of Property Act", as a whole. In this view of the matter section 2(d) would not be deemed to affect the provisions of section 105 of the Transfer of Property Act. Mr. Kacker has argued for the Fibres that by their act and conduct the Corporation and the company are estopped from contending that the lease was automatically renewable beyond a period of ten years, inasmu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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