TMI Blog1983 (8) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... e and Mrs. V.D. Khanna for the Respondent. JUDGMENT Desai, J. As the matter brooked no delay, after granting special leave to appeal, we proceeded to hear the appeal on merits. When the hearing was over, we pronounced the following order and stated that the reasons would follow. The order reads as under : "The appeal is allowed and the order made by the learned Single Judge as well as the Division Bench of the Bombay High Court rejecting the judge's summons taken out by the appellants is set aside and the judge's summons is granted to the extent indicated herein. The appellants shall deposit Rs. 1,50,000 by or before March 1, 1983, in this court. Respondent No. 2, Smt. Sabita V. Adapa, shall hand over vacant and peaceful possession of the property being a shop Nos. 8/9, on the ground floor of the building formerly known as ' Jagmohan Building No. 2 ' or as ' Ayaz Mansion' and now styled as 'Ram Kutir' situated as Station Road, Andheri, Bombay-400058, to the liquidator on or before February 28, 1983, who shall forthwith hand over possession on March 1, 1983, to the appellants, after taking a statement from the appellants that they have deposited the amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidator invited offers from persons willing to occupy the premises on terms and conditions laid down by the court. On July 2, 1980, the liquidator sought the direction of the-court whether to accept the offer of M/s. Modern Caterers represented by respondent No. 2 herein, Smt. Sabita V. Adapa. The company judge by his order dated July 3, 1980, directed the liquidator to accept the offer, as modified by the court, of the second respondent. The liquidator thereupon entered into an agreement on July 29, 1980, with the second respondent and gave possession of the premises to the second respondent on terms and conditions set out in the agreement. Appellants herein are the landlords of the building of which the premises involved in this appeal formed part. Appellants took out judge's summons praying for a direction to the liquidator to terminate the caretaker's agreement entered into with the second respondent under the directions of the court, and to hand over vacant and peaceful possession of the premises to the appellants. There were other prayers in the judge's summons with which we are not concerned in this appeal. The learned company judge repelled the contention of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be wound up is not a matter left to the uncontrolled discretion of the liquidator. The liquidator undoubtedly has the power under section 457 to carry on the business of the company, if it is necessary for the beneficial winding up of the company. And this power can be exercised not at the discretion of the liquidator but with the sanction of the court. Reliance was placed on In re Batey: Ex parle Emmanuel [1881] 17 Ch D 35, wherein it was observed that the power to carry on the business can only be exercised for the purpose of the beneficial winding up of the company not because the creditors may think that the business will be a very profitable one and that the longer it is carried on the better it will be, and that they will make a profit from it. Reliance was also placed on Panchmahals Steel Ltd. v. Universal Steel Traders [1976] 46 Comp. Cas. 706, 722 (Guj.), wherein it was held that, amongst others, "the liquidator with the sanction of the court has the power to carry on the business of the company so far as may be necessary for the beneficial winding up of the company. It is true that the liquidator cannot carry on business for any other purpose except the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Now, if the liquidator wanted to exercise power under section 457(1)( b ), he ought to have, with reference to the object clause in the memorandum of association of the company, shown that giving on lease or licence or under caretaker's agreement was part of the routine business of the company. Such is not the case here. In fact, as the business has come to a grinding halt, the office premises are of no use to the liquidator. He has, therefore, devised a scheme by which he can knock out the compensation for the use and occupation of the premises, not necessary for the use of the company, in contravention of the Rent Act and unfortunately the court accorded sanction to this venture of the liquidator, disregarding the relevant provisions of the Companies Act. The company was a tenant or a lessee of the premises of which the appellants are the landlords. The date of the commencement of the lease is not made available to us, but it is also not claimed on behalf of the liquidator that there was a lease of long duration. If so, the company was a statutory tenant under the Rent Act. The statutory tenancy confers the right to be in possession but if the tenant does not any more requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on the winding-up proceedings. The only course open to him was to direct the liquidator to surrender possession to landlords and save recurring liability to pay rent. Before we part with this judgment, we must take note of one submission that was made on behalf of the respondent. It was said that the creditors and members of the company in liquidation have suffered huge losses and if the liquidator would have been permitted to enter into an agreement with the second respondent, it would fetch a steady income which would have gone towards mitigating the hardships of the creditors and members of the company. The accounts of the company in liquidation were not brought to our notice nor can we permit violation of law, howsoever laudable the object of such act may be. However, we must record a statement made on behalf of the appellants when the aforementioned argument was being examined by us. It was said that the second respondent was to pay Rs. 2,500 per month as compensation under the directions of the court. That would have fetched the liquidator an income of Rs. 30,000 per year and deducting the costs, expenses and taxes, the liquidator may have been able to realise at least ..... X X X X Extracts X X X X X X X X Extracts X X X X
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