TMI Blog2017 (5) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... T OF CALCUTTA] as considered the similar facts and has held that section 536(2) of the Companies Act, 1956 provides for preservation of all the assets of a company upon commencement of the winding up proceedings, for ultimate distribution thereof amongst the creditors following winding up. It is held that the disposition of its properties and the effects made by a company after commencement of the winding up is covered by section 536(2) of the Companies Act, 1956. The Calcutta High Court declared the lease as void and held that the respondent was not entitled to any protection to remain in possession of the shops in question and was also not entitled to any protection under Andhra Pradesh Rent Control Act. The Company Court accordingly, directed the respondent to deliver vacant possession of the shops to the Official Liquidator. For the aforesaid reasons, the sub-lease executed by Modi Rubber Limited on 20th May, 2002 in favour of Bharat Marketing is thus declared as void. The oral application made by Modi Rubber Limited and Bharat Marketing for validating the said sub-lease is rejected. The Official Liquidator has made out a case for an order and direction against Bharat Market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aretaker or any other basis without the previous consent in writing of Modi Stone Ltd. which shall not be unreasonably withheld in case of a respectable and responsible party. Clause 13 of the said lease deed provided that lessee shall peaceably surrender yield up and deliver up the demised premises at the end or on sooner determination of the said term together with all the additions thereto and all fittings and fixtures thereto to the lessor in good and substantial repairs order and conditions. 5. Clause (IV) of the said lease deed dated 30th September 1997 provides for re-entry of the lessor upon demised premises or any part thereof upon determination of the lease deed but without prejudice to any claim right of action or remedy which either of the parties may have against the other in respect of any antecedent breach, nonperformance or non-observance of any of the covenants, conditions, stipulations or obligations therein contained. It is further provided that the lessor shall have given a notice to the lessee in writing to make good the breach of covenant in respect of which the re-entry is intended and if failed to do so within a reasonable time but not less than 30 days a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need for entering into a new agreement. 9. It was, however, alleged to have been clarified in the said letter that any renovation made by Modi Rubber Limited will not be removed from the flat at the time of the said Modi Rubber Limited handing over vacant and peaceful physical possession of the said flat to Modi Stone Limited. 10. It is the case of Modi Rubber Limited that the said company addressed a letter to Modi Stone Limited on 11th February 1998 informing the said company that as per the understanding arrived at between the parties, the said Modi Rubber Limited had alleged to have carried out and completed renovation of highest standard in the said flat. According to the said alleged letter, the cost of renovation alleged to have been incurred by Modi Rubber Limited was ₹ 54.35 lakh. Modi Stone Limited, by its letter dated 1st March 1998 to Modi Rubber Limited, has conveyed that it was satisfied with the quality of work and the timely completion of the renovation work carried out by the said Modi Rubber Limited and has alleged to have appreciated that the said Modi Rubber Limited had invested a heavy amount of ₹ 54.35 lakh on the renovation work as Modi Sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Bharat Marketing. It was further mentioned that in the event of Modi Rubber Limited surrendering the premises, Bharat Marketing would become the tenant of Modi Stone Limited and the tenancy would be subject to the terms and conditions as existing between Modi Stone Limited and Modi Rubber Limited. It is the case of the official liquidator that these letters alleged to have been executed by Modi Stone Limited in favour of Modi Rubber Limited and also Bharat Marketing are disputed by the official liquidator. 15. On 20th May 1999, the said Modi Stone Limited and Modi Rubber Limited executed a deed of confirmation thereby confirming the execution of lease deed dated 30th September 1997. The said confirmation deed was registered on 27th January 2000. 16. In the continuation Deed dated 20th May 1999, there is no reference to any of the correspondence alleged to have been exchanged between Modi Stone Limited and Modi Rubber Limited alleging extension of lease deed provided in the lease deed dated 30th September 1997. On 20th May 2002, the said Modi Rubber Limited has alleged to have executed a sub-lease with Bharat Marketing. In the said sub-lease, there is a reference to the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of winding up and the appointment of the official liquidator. 22. On 9th March 2004, the official liquidator filed a report for seeking direction to take possession of the premises and to appoint a Valuer for determining the market rent. On 23rd April 2004, Bharat Marketing filed a reply to the said report dated 9th March 2004. On 8th July 2004, this Court adjourned the said report to 5th August 2004 and ordered that in the meantime, the said Bharat Marketing can continue to deposit monthly rent without prejudice to the rights and contentions of the parties. 23. The said Bharat Marketing recorded that in the hearing of the official liquidator's report dated 9th March 2004, this Court directed the official liquidator to encash a draft submitted by the said Bharat Marketing which was lying with the official liquidator towards the payment of monthly rent. The official liquidator accepted the rent of ₹ 4,92,520/- from Bharat Marketing pursuant to the order passed by this Court without prejudice to the rights and contentions of the official liquidator and issued a receipt on 12th July 2004. 24. On 8th August 2008, Modi Rubber Limited has alleged to have addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aratory suit in the Court of Small Causes, Bombay in respect of the premises against the official liquidator. By an order dated 13th April 2011, this Court granted leave in favour of Bharat Marketing to file a declaratory suit in the Court of Small Causes, Bombay. After granting the said leave under Section 446 (1), the said Bharat Marketing on 18th April 2011 filed a suit before the Court of Small Causes at Bombay against Modi Rubber Limited, Modi Stone Limited (in liquidation) and the official liquidator inter alia praying for a decree that the said Bharat Marketing is the lawful sub-tenant or deemed tenant of Modi Rubber Limited and/or Modi Stone Limited (in liquidation) and the official liquidator in respect of the premises and also prayed for permanent injunction and order against the defendants in the said suit. The official liquidator has filed a written statement in the said suit denying the allegations made in the affidavit filed by Bharat Marketing. 28. On 10th August 2012, the Court of Small Causes passed an order on interim application filed by Bharat Marketing for temporary injunction against the defendants to the said suit from dispossessing the plaintiff or from d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Learned counsel for the Official Liquidator placed reliance on the judgment of Supreme Court in case of NGEF Ltd. vs. Chandra Developers Pvt. Ltd., (supra) and more particularly paragraphs 54 to 57, 60 and 67 and would submit that the company court is custodian of the interest of the company and its creditors. The Court has to apply its mind as regard the question whether the disposition of the assets of the company is in the interest of the creditors or not. He submits that the provisions of section 536(2) of the Companies Act, 1956 enures to the benefits of the creditors and it is duty of the company court to see that the transaction is one which must benefit the creditors of the company. He submits that under section 536(2) disposal of the assets of the company has to be dealt with and not the disposal of the asset by the company. He submits that sub-lessee has not filed any application or raised any plea to validate the transaction of alleged sub-lease between Modi Rubber Ltd. and the sub-lessee. 35. Learned counsel for the Official Liquidator placed reliance on the unreported judgment of this court delivered on 5th September,2012 in case of BIFR vs. Hindustan Transmissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the company in liquidation. 37. Learned counsel for the Official Liquidator placed reliance on the judgment of Calcutta High Court in case of Re. Prudential Capital Markets Ltd. (In Liquidation) (2007) 140 Comp. Cas 754 Cal. and in particular paragraphs 1, 3, 4, 9, 10, 12, 17 to 23, 27, 33 to 43, 48 to 54 and 60. He submits that under section 536(2) of the Companies Act, company court can declare the disposition of the property of the company even by a third party as void. He submits that Calcutta High Court in the said judgment had declared the lease deed as void and had held that the transferee was not entitled to any protection under Andhra Pradesh Rent Control Act and directed the transferee to deliver vacant possession of the shop room to the Official Liquidator. He submits that the said order was passed by Calcutta High Court on a letter for direction filed by the Official Liquidator, identical to the procedure of filing report. He submits that the alleged sub-lease in favour of Bharat Marketing by Modi Rubber Ltd. was admittedly after commencement of the winding up and without obtaining consent of the company court and is thus ex-facie void under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hancery Division in case of In re J.Leslie Engineers Co. Ltd. (In Liquidation) (1976) The Weekly Law Reports, 292 and in particular pages 293, 294, 297, 299, 303 and 304 in support of the submission that the disposition of the property of the company in liquidation in favour of the creditors by the ex-directors or transfer of the property by a third party directly or indirectly would amount to disposition of the assets of the company and would attract section 536(2) of the Companies Act, 1956. He submits that the consent for subletting in favour of Bharat Marketing was purported to have been given by the exdirectors of the company after commencement of the winding up and thus would attract section 536(2) of the Companies Act, 1956 and is void. 43. Learned counsel for the Official Liquidator placed reliance on the judgment of this court in the matter of Magnasound India Ltd. filed by Asha Bhosale passed in Official Liquidator's report reported in 2016(1) Bom.C.R.44 and in particular paragraphs 32 and 38 in support of the submission that under section 536(2), sale of the assets by a third party would be within the mischief sought to be remedied by section 536(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt by exercising jurisdiction under the said provision. It is submitted that the Small Causes Court cannot decide whether the transaction entered into between the lessee with the sub-lessee relating to the property of the company in liquidation is void or not and the said issue can be decided only by the Company Court. 47. Learned counsel placed reliance on the judgment of the Supreme Court in case of Sudershan Chits (I) Ltd. vs. O. Sukumaran Pillai Ors. (1984) 4 SCC 657 and in particular on page 661 and would submit that the Parliament devised a cheap and summary remedy by conferring jurisdiction on the Court winding up the company to entertain petitions in respect of claims for and against the company. It is submitted that it is the duty and power of the Company Court to accelerate the disposal of winding up proceedings, and the object behind enacting section 446(2) is to receive such construction at the hands of the Court as would advance the object and at any rate not thwart it. He submits that this Court is not even bound to transfer the declaratory suit filed by the sub-lessee before this Court or to wait for the out come of the said suit before issuing any direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of Modi Rubber Limited are ex-facie back dated. It is submitted that Modi Rubber Limited could not have agreed to enter into principal lease agreement dated 30th September, 1997 without knowing actual condition of the premises and in ordinary course would not have agreed to bear renovation charges of more than ₹ 50,00,000/-. He submits that the alleged right of extension / renewal is not referred in the Deed of Confirmation dated 20th May, 1999 and also in the sub-lease dated 20th May, 2002 between Modi Rubber Limited and Bharat Marketing. 51. It is submitted that the said alleged renewal of the lease deed by exchange of two letters required registration compulsorily and in view of the admitted fact that those letters purporting renewal lease deed not having been registered, cannot be relied upon by the parties before this Court as an admissible evidence. In support of this submission, learned counsel for the Official Liquidator placed reliance on the judgment of the Supreme Court in case of State of Uttar Pradesh Ors. vs. Lalji Tandan, (2004) 1 SCC 1. 52. It is submitted that whether those two alleged letters would renew the principal lease or would exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and are governed by the Transfer of Property Act, 1882. It is submitted that the directions for recovery of possession of the leasehold property sought in the report submitted by the Official Liquidator cannot be granted in the report since report submitted by the Official Liquidator is in the nature of administrative directions and not for adjudication of the claims or dispute. He submits that such reliefs if at all can be considered, can be considered by the Company Court only in the company application and not in the report submitted by the Official Liquidator. He submits that in the company application, the company court can even record oral evidence wherein such oral evidence cannot be recorded in the report submitted by the official liquidator. Learned senior counsel gave an illustration before this court i.e. if the company in liquidation is a lessor and if the lessee commits any breach of the provisions of the lease agreement, the lessor can terminate lease and initiate action in the court of law for recovery of possession. He thus submits that no such directions for recovery of possession can be granted by this court in Official Liquidator's Report. He however does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Modi Rubber Ltd. and seeks that this court should hold that those letters are anti-dated which allegations cannot be adjudicated upon in this report. Learned senior counsel placed reliance on the judgment of this court in case of Commercial Art Engravers Pvt. Ltd. vs. Indian and Eastern Newspapers Society, (1978) Vol.48 Company Cases 36 and in particular relevant paragraphs on pages 46 and 47. 58. It is submitted by the learned senior counsel that even if the company is wound up, the status of the company is not changed. In place of the company in liquidation, charge and assets of the company are taken over by the official liquidator. The official liquidator does not become a super landlord. The relationship between the lessor and lessee continues even after the company in question is wound up. In support of this submission, learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Nirmala R. Bafna vs. Khandesh Spinning and Weaving Mills Co. Ltd. Anr., reported in (1992) 2 SCC 322 and in particular paragraph 2 to 6, 9, 14 and 17 to 19 and would submit that merely because the company goes into liquidation and the liquidator is appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that an interest was already created in the property in favour of Modi Rubber Limited with a covenant to create sub-lease. Lease creates an interest in the property. 62. It is submitted that even if this Court comes to the conclusion that subletting by Modi Rubber Limited in favour of Bharat Marketing was illegal or contrary to the provisions of the lease deed or contrary to the provisions of the Companies Act, 1956 in view of the fact that there is no right of re-entry provided in the lease deed, there is no consequence of any alleged breach committed, if any, by Modi Rubber Limited or by the company in liquidation. In support of this submission, learned senior counsel placed reliance on the judgment of this Court in the case of Madarsa'heb Ors.Vs. Sannabawa' Gujaransha'h, reported in ILR XXI Bombay 195 and in particular relevant paragraphs on page 197 thereof. He also placed reliance on the judgment of John Nadjarian Vs.E.F. Trist, reported in AIR (32) 1945 Bombay 399 and in particular relevant paragraphs on pages 401 and 402 in support of the aforesaid submission. 63. Learned senior counsel placed reliance on the judgment of this Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Application No.80 of 2012 in Company Petition No.1214 of 1999 and in particular paragraphs 21 to 26 in support of his submission that the Company Court has an ample power to consider the transaction carried out by the company in liquidation in good faith and with honest intention which transaction is just and fair while passing an order of validation of the transaction in question and the same can be done in even without any formal application. 66. It is submitted by the learned senior counsel that in this case, the lease period was extended by the lessor in favour of the lessee which did not require any execution of fresh lease deed. He submits that there is distinction between the renewal and the extension. He submits that conditions required for renewal of lease are not applicable in case of extension of lease. It is submitted that the right of extension was granted to the lessee by the lessor in view of the lessor having incurred heavy expenditure for renovation of the lease property. In support of his submission that there is distinction between the renewal and the extension, learned senior counsel placed reliance on the judgment of the Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Official Liquidator has accepted the head-lease as valid and on this ground alone, judgment of Calcutta High Court relied upon by learned counsel for the Official Liquidator is clearly distinguishable in the facts of this case. 70. Mr. Balsara, learned counsel appearing for Bharat Marketing adopted the submissions made by Mr. Samdhani, learned senior counsel for Modi Rubber Ltd. and made additional submissions. He submits that there are several complicated issues involved in this report filed by the Official Liquidator which cannot be decided by this court in the report submitted by the Official Liquidator for seeking certain directions. It is submitted that no presumption can be drawn in the report submitted by the Official Liquidator that the correspondence exchanged between the lessee and the sub-lessee and between the lessor and the lessee are fraudulent. It is submitted that in view of section 41 of the Bombay Presidency Small Causes Court Act the Small Causes Court has exclusive jurisdiction to adjudicate upon the issues involved in this report and not by this court by exercising powers under the provisions of Companies Act, 1956. 71. It is submitted by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and keep in mind the duties and responsibilities of the Official Liquidator while deciding this matter and not the alleged execution of the sub-lease. The Company court has to protect the interest of contributories such as workers and others which shall prevail. He submits that the transaction of lease is entirely distinct transaction and different from the sub-lease. He submits that it is not the case of the sub-lessee that it is in possession of the said premises as the lessee or tenant on month to month basis. He submits that it is the case of the sub-lessee that all throughout that he was in possession as sub-lessee under the alleged sub-lease dated 28th May, 2002. 74. It is submitted by the learned counsel that the creation of sub-lease by the lessee in favour of the sub-lessee itself is a distinct disposition and is hit by section 536(2) of the Companies Act, 1956 which property is an asset of the company in liquidation. He submits that even the disposition by a third party of the property of the company in liquidation will be hit by section 536(2). He submits that the mischief rule has to be applied for such transaction. It is submitted that by virtue of creation of alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in liquidation. In view thereof, clause (11) of the lease deed could not continue in operation. The rights and obligation of the company in liquidation after the date of commencement of winding up are subject to the provisions of the Companies Act, 1956. In his alternate submission, learned counsel for the Official Liquidator submits that the purported consent by the lessor itself was after commencement of the winding up of the respondent company. The alleged consent was given by the respondent company only on 4th May, 2002. The said alleged consent given by the lessor itself was hit by section 536(2) of the Companies Act, 1956. 78. Insofar as issue as to whether the sub-lessee or lessee can apply for validation of transfer on oral application is concerned, it is not the case of the Official Liquidator that a separate application for validation is required in writing. It is however submitted that no case is made out by the lessee or sub-lessee for validating transaction as the same is void. He placed reliance on the judgments of this court in case of BIFR vs. Hindustan Transmission Products (In Liquidation) (supra), Sunita Vasudeo Warke (supra) and in case of judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Marketing. The said lease deed also did not provide any extension of the lease period. It is also an admitted position that the said lease deed dated 30th September 1997 was not registered. 83. A perusal of the record further indicates that Modi Stone Ltd., now in liquidation had filed an application being Case No.32 of 1998 under Section 15(1) of the SICA with the BIFR. By an order dated 15th April 1998, the said Modi Rubber Ltd. was declared as a Sick Industrial Company in terms of Section 3(1)(o) of the SICA Act. It is not in dispute that on 25th April 2001, the BIFR decided the proposal made by Modi Stone Ltd and recommended the said company for winding up under the provisions of the Companies Act, 1956 read with the provisions of the SICA. The BIFR, thereafter, forwarded the said copies of the said orders to the Registrar of this Court on 11th May 2001. An appeal filed by the said Modi Stone Ltd. before AAIFR against an order of recommendation of the BIFR for winding up of the company came to be dismissed on 8th August 2001. It is not in dispute that this Court, thereafter, registered a winding up petition on receipt of the papers from BIFR and accepted the said petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Modi Rubber Ltd. suggested that if Modi Stone Ltd. was agreeable to the said condition, the addendum to the lease may be prepared and sent the same to Modi Stone Ltd. for signature. It was alleged in the said letter that only upon receiving all such documents, the said Modi Rubber Ltd. would renovate the said flat and incur heavy expenditure in excess of ₹ 50 lakh. There is no acknowledgment on the said letter also. 87. By an alleged letter dated 18th October 1997, from Modi Stone Ltd. to Modi Rubber Ltd., the Modi Stone Ltd. has purported to have agreed to confer upon Modi Rubber Ltd. a right to extend the lease deed by having two more extensions for the same period of 10 years each beyond stipulated period on the same terms and conditions as contained in the said lease deed dated 30th September 1997. It was alleged in the said letter that it was understood that upon exercising the right, the lease period would automatically extend and there would be no need for entering into a new agreement. It was further alleged that the said lease deed dated 30th September 1997 shall be read along with correspondence dated 1st October 1997, 7th October 1997, 12th October 1997 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quested Modi Stone Ltd. to grant permission in writing to grant the said premises on sub-lease in favour of Bharat Marketing. The said alleged letter dated 16th April 2002 from Modi Rubber Ltd. to Modi Stone Ltd. indicates that in the said letter, Modi Rubber Ltd. had invited the attention of Modi Stone Ltd. to clause 11 of the said lease deed dated 30th September 1997 that the premises could not be sub-let prior consent in writing of Modi Stone Ltd. and accordingly, a request was alleged to have been made to Modi Stone Ltd. for permission in writing to induct a subtenant in the said premises subject to the approval of Modi Stone Ltd. In the said alleged letter, it was mentioned that Bharat Marketing was interested in taking up sub-tenancy in the said premises. There is no acknowledgement of the said alleged letter by Modi Stone Ltd., now in liquidation. Modi Stone Ltd. has alleged to have responded to the letter dated 16th April 2002 by its letter dated 4th May 2002 and purported to have granted consent to the execution of the sub-lease in favour of Bharat Marketing subject to the condition that the said Bharat Marketing would be made aware of and shall agree to be bound by the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommendation of the BIFR dated 25th April 2001 recommending winding up of Modi Stone Ltd. and after registration of winding up petition by this Court against the said Modi Stone Ltd. on 25th January 2002. 96. The question that arises for consideration of this Court is whether the alleged permission dated 4th May 2002 granted by Modi Stone Ltd. for creation of sub-lease in favour of Bharat Marketing was after commencement of winding up of Modi Stone Ltd under Section 441 of the Companies Act, 1956 and thus the execution of any agreement for sub-lease in favour of Bharat Marketing on 20th May 2002 without obtaining permission of the Company Court is void or not. 97. Section 441 (2) of the Companies Act, 1956 clearly provides that the winding up of the company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up in the cases other than the provision of Section 441(1) of the Companies Act, 1956. In this case, Modi Stone Ltd. had not passed any resolution for voluntary winding up and thus Section 441(2) of the Companies Act, 1956 would be attracted and the commencement of winding up of Modi Stone Ltd would be the date when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the Bharat Marketing was after the date of commencement of the date of Modi Stone Ltd. and thus such disposition of the property of the company is ex facie void under Section 536 (2) of the Companies Act, 1956. The judgment of the Supreme Court in the case of NGEF Ltd. Vs. Chandra Developers Pvt. Ltd. (supra) squarely applies to the facts of this case. I am respectfully bound by the said judgment. 100. Delhi High Court in the matter of Kapri International Pvt. Ltd., reported in 2013 SCC OnLine Del 2176 has held that the commencement of winding up would be the date on which the BIFR formed its prima facie opinion that the company should be wound up. The Delhi High Court has followed the judgment of the Supreme Court in the case of NGEF Ltd. Vs. Chandra Developers Pvt. Ltd. (supra). I am in agreement with the views expressed by the Delhi High Court in the matter of Capri International Pvt. Ltd. (supra). 101. Gujarat High Court in the case of Indoco Remedies Ltd. Vs. OL of M/s.Kay Packaging Pvt. Ltd., reported in (2009) 150 Comp Cas 770 (Guj) has held that once the winding order is passed, it relates back to the date of commencement of the proceedings w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y bona fide transaction carried out and completed in ordinary course of current business can be sanctioned by the Court. On the other hand, it will not allow the assets to be disposed of at the mere pleasure of the company, and because the fundamental principle of equality amongst creditors cannot be violated. This Court in the said judgment held that even if a disposition of the property was before the order of winding-up, the Court has to come to the conclusion that the transaction was in the best interest of the company which has to be pleaded and proved. It is held that the property belonging to a company does not lie at the pleasure of the company or its Board of Directors. This Court found that there was neither any pleading nor any proof on the record before the Company Judge that the transaction was arrived at on the basis of the prevailing market value or that the same was in the best interest of the company, this Court declared the said transaction as void and refused to validate such transaction. 104. A perusal of the record clearly indicates that even in this case, neither it is pleaded nor proved by Modi Rubber Ltd. or by Bharat Marketing that the execution of alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing is concerned, this proposition is not disputed by the learned counsel for the official liquidator. Even if this Court considers an oral application made by Modi Rubber Ltd. or Bharat Marketing for validation of the transaction of the alleged sub-lease between them is considered by this Court, a perusal of the record clearly indicates that none of these parties could demonstrate before this Court that the said transaction was in the interest of the company or was in the ordinary course of business of Modi Stone Ltd. 108. A perusal of the record, on the other hand, clearly indicates that the said disposition of the property of the company in liquidation was made with the ulterior motive and that also at the stage when winding up petition was already registered by this Court pursuant to the recommendation made by the BIFR. Neither Modi Rubber Ltd. nor Bharat Marketing could produce any proof of delivery of the alleged letters dated 16th April 2002 or 4th May 2002 alleged to have exchanged between them. No such alleged letters are referred in the sub-lease alleged to have been executed between Modi Rubber Ltd. and Bharat Marketing. 109. In so far as the issue of extensio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the record further indicates that though the premises in question is admeasuring 3000 sq.ft. on Carmichael Road which is a prime property in a posh locality and being used for commercial purposes, the sub-lease was granted only on meagre sum of ₹ 50,000/- per month which ex facie shows that the said transaction is fraudulent and is not at arms length. 112. In so far as the submission of Mr.Samdhani, learned senior counsel for the Modi Rubber Ltd. that though upon an order of winding up of the company, the official liquidator takes control of the assets of the company in liquidation but the assets do not vest in him is concerned, Section 456 (1) of the Companies Act, 1956 provides that where a winding up order is made or where a provisional liquidator is appointed, the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled. Section 456(1A) provides that for that purpose, the liquidator or the provisional liquidator, as the case may be, may even apply by writing before the Chief Presidency Magistrate or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies (Court) Rules, 1959, the official liquidator is empowered to submit a report in a case where the winding up order is made by the Company Court for appropriate directions and reliefs. The official liquidator is not required to file any suit for seeking any reliefs which can be granted by the Company Court by exercising powers under Section 446(2) of the Companies Act, 1956. All contentious issues can be decided by the Company Court by exercising powers under Section 446(2) of the Companies Act, 1956 including any claims by or against the company in liquidation (including any claims by or against any of its branches in India. 116. Under Section 446(2)(d) of the Companies Act, 1956, the Company Court is also empowered to entertain or dispose of any question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company. In my view, there is no substance in the submission of the learned senior counsel for Modi Rubber Ltd. that only an administrative direction can be granted by the Company Court in the report submitted by the official liquidator or that the evidence can be recorded only in the company application and not in the repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the property of the company in liquidation on a letter for direction to such effect filed by the official liquidator. Calcutta High Court after considering several judgment of the Supreme Court and various other Courts decided various rival issues raised even by a third party and declared the lease as void by holding that the lessee was not entitled to any protection to remain in possession of the property and also was not entitled to any protection under the Andhra Pradesh Rent Control Act. In this case, the official liquidator has rightly filed a report for seeking various directions under the provisions of the Companies Act, 1956 read with Companies (Court) Rules. In my view, all such issues can be decided by the Company Court including the contentious issues raised by the third party and the official liquidator in a report submitted by the official liquidator before a Company Court. 120. In so far as the submission of the learned senior counsel for Modi Rubber Ltd. that under clause 11 of the lease deed dated 30th September 1997 entered into between the company in liquidation and Modi Rubber Ltd., the Modi Rubber Ltd. was entitled to give such property on sub-lease up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned senior counsel for Modi Rubber Ltd that in the lease deed dated 30th September 1997 itself, such permission was granted or deemed to have been granted is contrary to the said alleged letter dated 16th April 2002 and also contrary to clause 11 of the lease deed dated 30th September 1997. 122. By that as it may, a perusal of clause 11 of the lease deed dated 30th September 1997 clearly prohibits subletting of the demised premises or any part thereof or to be used on leave and license or caretaker or any other basis without the previous consent in writing of Modi Stone Ltd. The said clause does not indicate that even if no such application in writing is made before creating sub-tenancy as provided in the said clause, the said clause itself can be construed as deemed permission even without making any such application for seeking permission. Modi Rubber Ltd. could not produce any other application for seeking permission for creating sub-tenancy before commencement of winding up of the company in liquidation. Reliance placed by the learned senior counsel on the judgment of the Supreme Court in the case of Kamala Ranjan Roy Vs. Baijnath Bajoria (supra) would not assist the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Board of Directors of the company had passed a special resolution affirming the agreement of sub-tenancy in favour of the appellant therein, who had raised a plea of sub-tenancy in her favour. The Supreme Court prima-facie rendered a finding that the claim of the appellant therein for protection of Bombay Rent Control Act should not be rejected. There was a consent of the landlord to the sub-tenancy in favour of the appellant in that case. 127. In this case, the alleged consent of the company in liquidation for creation of sub-tenancy was alleged to have been granted much after the commencement of the winding up proceedings, which was not the case before the Supreme Court in case of Nirmala R. Bafna (supra). In this case, the company in liquidation itself was the owner of the property in question and not the tenant. The Supreme Court had observed that the tenancy rights of the company had in the said flat may not be an asset for the purpose of liquidation proceedings. The facts before the Supreme Court in the said judgment were totally different and are clearly distinguishable. The said judgment, in my view, would not assist the case of Modi Rubber Limited. It is not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that the company in liquidation being lessor was granted right of re-entry upon the demise premises or any part thereof upon the lessee committing any breach or in view of the nonperformance or non-observation of any of the covenant conditions, stipulation or objections contained in the said lease deed. The said power of re-entry was however subject to proviso that the said power was not to be exercised unless and until the lessor would have given a notice in writing to the lessee to make good breach of covenant in respect of reentry was intended and if the lessee would have failed to do so within a reasonable time but not less than 30 days after the receipt of the said notice. In my view the entire argument of the learned senior counsel is thus fallacious and contrary to the provisions of the Lease Deed as indicated aforesaid providing for the right of re-entry vested in the lessor. The judgment of this Court in case of Madarsa's Heb Ors. (supra) and the judgment of this Court in case of John Nadjarian (supra) would not assist the case of Modi Rubber Limited and are clearly distinguishable in the facts of this case. 130. Insofar as the judgment of this Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing an order of validation of the transaction is concerned can be validated is concerned, there is no dispute about this proposition of law. This Court in the said judgment held that the expression unless the Court otherwise orders under section 536(2) of the Companies Act, 1956 imposes a duty on the Court, that it must deal with each case on its own facts, and have regard to questions of good faith and honest intention, to do what is just and fair. The company in liquidation in that judgment had exercised disposition power and such sale was already completed before presentation of the suo-moto BIFR recommended company petition before this Court and nothing remained to be done. The disposition was complete in that matter and thus this Court validated such transaction between the company in liquidation and a bona fide purchaser. 133. In my view, the said judgment of this Court in case of Pavlova (supra) is clearly distinguishable in the facts of this case. In this case, the transaction of sub-lease was not even commenced before commencement of the winding up proceedings against the company in liquidation and thus in this situation, such transaction cannot be validated by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of Bharat Marketing as canvassed by the learned counsel appearing for Modi Rubber Limited and Bharat Marketing. 137. Insofar as the judgment of the Supreme Court in case of Anthony (supra) relied upon by Mr.Samdhani, learned senior counsel for Modi Rubber Limited is concerned, in my view, the said judgment would not assist the case of Modi Rubber Limited in view of the fact that the alleged sub-lease itself was created after the date of commencement of the winding up proceedings. The said transaction is thus ex-facie void. 138. Insofar as the judgment of the Supreme Court in case of Biswabani Private Limited (supra) relied upon by the learned senior counsel for Modi Rubber Limited is concerned, it is held by the Supreme Court that notwithstanding the non-exercise of the option on the date of expiry of the lease, the contractual tenancy having come to an end, the tenant would be a tenant holding over if requirements of section 116 of the Transfer of Property Act are satisfied. In my view, this judgment of the Supreme Court will not assist the case of Modi Rubber Limited or of Bharat Marketing in view of the fact that the said transaction of the alleged sub-lease itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balsara, leaned counsel for Bharat Marketing that the complicated issues raised by his client cannot be adjudicated upon in the report filed by the Official Liquidator is concerned, in my view there is no merit in this submission of the learned counsel. Under section 536(2) of the Companies Act, 1956, the Company Court has to decide whether the transaction in question were entered into after commencement of the winding up proceedings or not. Admittedly in this case, Modi Rubber Limited had applied for permission to create sub-lease in favour of Bharat much after commencement of the winding up proceedings. In view of such facts at hand, there is no merit in the submission of the learned counsel for Bharat Marketing that there are any complicated issues raised by his client in these proceedings. Be that as it may, the powers of the Company Court under section 536 are very wide and validity of all the transfers in respect of the properties of the company in liquidation claim not only by company in liquidation but also by a third party in the properties of the company in liquidation made after commencement of winding up can be decided by the Company Court under section 536(2) in a repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission of Mr.Balsara that though this Court can declare a transaction as void under section 536(2), the same cannot be done unless the suit filed by Bharat Marketing before the Small Causes Court is transferred to this Court itself. There is also no merit in the submission of the learned counsel for Bharat Marketing that since the suit was filed by Bharat Marketing before the Small Causes Court for declaration of the alleged sub-tenancy after obtaining leave under section 446(1) of the Companies Act, 1956, this Court cannot decide the issues raised in the said suit by Bharat Marketing. In my view merely because this Court has granted leave to file a suit under section 446(1), this Court is not precluded from deciding the issue whether the transaction between the company in liquidation and a third party or by Modi Rubber Limited in this case, who was claiming to be a tenant in favour of Bharat Marketing are post commencement of the winding up proceedings and are thus void or not. 145. In my view under the provisions of the Companies Act, 1956, the Official Liquidator is a trustee of the secured or unsecured creditors, the workers and contributories. The rights of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has not disputed the case of the Official Liquidator that the company in liquidation and Modi Rubber Limited belonging to the same group. In my view, under section 536(2) of the Companies Act, 1956, the Company Court can declare a transaction carried out not only by the company in liquidation in respect of its property but also in respect of a third party void. All such issues can be decided only by the Company court under the provisions of the Companies Act, 1956. 148. The Supreme Court in case of Pankaj Mehra Anr. (supra) has held that the word void in section 536(2) of the Companies Act, 1956 need not automatically indicate that any disposition should be void-ab-initio since the Court has power to order otherwise. The Supreme Court has quoted the English authority which was referred by the Gujarat High Court in (1986) 59 Company Cases, 201 (Gujarat) with approval in which it was held that any bona fide transaction carried out and completed in ordinary course of current business can be sanctioned by the Court and on the contrary it will not allow the assets to be disposed of at the mere pleasure of the company and would cause fundamental principles of equity amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the facts and circumstances of this case. 151. The Calcutta High Court in case of Prudential Capital Markets Limited (in liquidation) has considered the similar facts and has held that section 536(2) of the Companies Act, 1956 provides for preservation of all the assets of a company upon commencement of the winding up proceedings, for ultimate distribution thereof amongst the creditors following winding up. It is held that the disposition of its properties and the effects made by a company after commencement of the winding up is covered by section 536(2) of the Companies Act, 1956. The Calcutta High Court declared the lease as void and held that the respondent was not entitled to any protection to remain in possession of the shops in question and was also not entitled to any protection under Andhra Pradesh Rent Control Act. The Company Court accordingly, directed the respondent to deliver vacant possession of the shops to the Official Liquidator. In my view, the facts in the Calcutta High Court and this Court are almost identical and thus the said judgment would assist the case of the Official Liquidator. I am in agreement with the views expressed by the Calcutta High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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