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In Re: Board of Industrial and Financial Reconstruction, Modi Stone Ltd.

2017 (5) TMI 318 - BOMBAY HIGH COURT

Void lease deed - prayer for an order and direction to hand over possession of the property of the company in liquidation to the official liquidator - Held that:- The onus was on Modi Rubber Limited as well as Bharat Marketing to plead and prove that the said alleged sub-lease in favour of Bharat Marketing by Modi Rubber Limited was not only a bonafide transaction but was in the interest of the company in liquidation and also that the said transaction was carried out in ordinary course of busine .....

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ts Limited (in liquidation) [2007 (10) TMI 393 - HIGH COURT 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) o .....

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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 Marketing to hand over vacant and peaceful possession of the property of the company in liquidation as prayed in prayer clause (b) of the Official Liquidator's Report. - OFFICIAL LIQUIDATOR’s REPORT NO. 136 OF 2015 IN COMPANY PETITION NO. 166 O .....

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s report for declaration of lease deed dated 30th September 1997 executed between Modi Stone Limited (in liquidation) and Modi Rubber Limited and sub-lease dated 20th May 2002 executed between Modi Rubber Limited and Bharat Marketing and Advertising Company Private Limited (for short Bharat Marketing ) as void and has also prayed for an order and direction against the said Bharat Marketing to hand over possession of the property of the company in liquidation to the official liquidator. 2. During .....

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ber 1997, Modi Stone Limited (in liquidation) executed a Lease Deed in favour of the Modi Rubber Limited in respect of the property of the company situated at Flat No.2, ground floor along with garage in the basement of the building known as Normandie Co-operative Housing Society, Carmichael Road, Mumbai400 026 on the terms and conditions recorded in the said lease deed. 4. Clause 11 of the said lease deed dated 30th September 1997 provided that lessee shall not sublet, assign, underlet or part .....

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ns 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 cove .....

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1997 and expiring in the month of July 2008. 6. It is the case of Modi Rubber Limited that on 1st October 1997, the said Modi Rubber Limited addressed a letter to Modi Stone Limited alleging that all the rooms in the said flat needed complete renovation including change of flooring and new fittings. In the said letter, it was alleged that since the said flat was required for its senior executive, it was needed to be renovated to high standard. The said Modi Rubber Limited by the said alleged let .....

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ted will agree to renovate the said flat which will require heavy expenditure on renovation, in excess of ₹ 50 lakh and if it is required to carry out such repairs and renovation, they will have the right of two more extensions beyond the stipulated period on the same terms and conditions as contained in the lease deed dated 30th September 1997. By the said letter dated 12th October 1997, the said Modi Rubber Limited asked Modi Stone Limited to confirm as to whether Modi Stone Limited was .....

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and conditions as contained in the lease deed dated 30th September 1997. It was alleged in the said letter that upon exercising the right, the lease period will automatically extend and there will be no 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 .....

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4.35 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 Stone Limited was not financially in a position to undertake to the said renovation work. It is the case o .....

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IFR). By an order dated 15th April 1998, Modi Stone Limited was declared as a Sick Industrial Company in terms of Section 3(1)(o) of the SICA. Thereafter, Modi Stone Limited filed rehabilitation proposal with the BIFR on 5th November 1998. By an order dated 25th April 2001, the said BIFR decided the said proposal and recommended winding up of the said Modi Stone Limited. 12. By its letter dated 11th May 2001, the BIFR forwarded copies of the said orders to the Registrar of this Court. On 8th Aug .....

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t of the sub-lease of the said property in favour Bharat Marketing thereby purporting to have granted consent to Modi Rubber Limited for execution of sub-lease in favour of Bharat Marketing. In the said alleged letter, it was mentioned that Bharat Marketing would be made aware of and agree to be bound by the terms of the lease deed dated 30th September 1997 read with deed of confirmation dated 20th May 1999 and this would be mentioned in the sub-lease itself. 14. It was alleged to have been ment .....

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e 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 confirmatio .....

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ptember 1997 and registered deed of confirmation dated 20th May 1999. There is also a reference to the letter dated 16th April 2002 alleged to have been addressed by Modi Rubber Limited to Modi Stone Limited and letter dated 4th May 2002 alleged to have been addressed by Modi Stone Limited to Modi Rubber Limited requesting for written permission to grant sub-lease and the said permission alleged to have been granted by Modi Stone Limited respectively. In the said sub-lease also, there is no refe .....

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997. 18. The said Modi Stone Limited is ordered to be wound up by an order dated 25th July 2002 passed by this Court and the official liquidator of the said company Modi Stone Limited in liquidation came to be appointed. On 10th January 2003, Modi Stone Limited has alleged to have addressed a letter to Bharat Marketing to pay rent directly to Modi Stone Limited as Modi Rubber Limited had defaulted in paying rent to Modi Stone Limited (in liquidation). On 14th June 2003, Bharat Marketing paid ren .....

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ber 2003), Bharat Marketing informed the official liquidator about purported sub-lease dated 20th May 2002 and forwarded a copy thereof to the official liquidator. 21. In the affidavit filed by Bharat Marketing in this Court, it is alleged that Bharat Marketing was paying rent to Modi Stone Limited between January 2003 and May 2003 which period was much after the order of winding up and the appointment of the official liquidator. 22. On 9th March 2004, the official liquidator filed a report for .....

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he 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 Augu .....

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letter to Bharat Marketing. The official liquidator referred to an order dated 24th July 2009 passed by this Court in Company Application No.426 of 2009 filed by Modi Stone Employees Union directing the official liquidator to take possession of the said premises after verifying that there are no restraint order pertaining to the said premises. By the said letter, the official liquidator called upon Bharat Marketing to hand over possession of the said premises within two weeks from the date of sa .....

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without prejudice to the rights and contentions of the parties. In the said letter, it was alleged that in compliance of the said order, the said company had been paying the rent regularly to the official liquidator. Bharat Marketing called upon the official liquidator to withdraw the said letter dated 4th March 2011. The official liquidator forwarded a copy of the Company Application No.426 of 2009 filed by Modi Stone Employees Union to the advocate of Bharat Marketing and a copy of the order .....

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espect 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 s .....

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plication filed by Bharat Marketing for temporary injunction against the defendants to the said suit from dispossessing the plaintiff or from doing any act so as to disturb or interfere with his peaceful and exclusive use, occupation, enjoyment and possession of the suit premises without following due process of law. 29. On 5th February 2014, the official liquidator filed a report before this Court for permission to sell the subject movables/articles lying in the premises situated at 18, Camac S .....

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y in liquidation including the flat in question. On 26th February 2015, the official liquidator filed its report inter alia praying for various reliefs already summarized as aforesaid. This official liquidator s report was opposed by Modi Rubber Limited as well as Modi Stone Limited and Bharat Marketing by filing separate affidavits-in-reply and by making oral submissions across the bar. 31. Mr. Jagitiani, learned counsel appearing for the official liquidator invited my attention to the lease de .....

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ed the said order made by the BIFR to this Court. This Court registered a winding up petition by an order dated 24th January 2002. He submits that winding up of the company shall be commenced under Section 441 of the Companies Act, 1956 from the date when the reference is made by the BIFR to this Court. 33. It is submitted that the final order of winding up under Section 536(2) of the Companies Act, 1956 is not relevant. On the date of recommendation of the winding up by the BIFR, the winding up .....

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ts 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 b .....

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rs. He submits that even if the alleged transaction of sub-lease has to be validated under section 536(2) of the Companies Act, 1956, the applicant has to plead and prove not only that the transfer is bonafide but also that the transfer was in the interest of the company. He submits that if the transfer of the property is not in the best interest of the company, it cannot be validated. He submits that the said judgment was delivered by this court in the Official Liquidator's Report and the c .....

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Sunita Vasudeo Warke vs.Official Liquidator, 2013(2) Mah.L.J.777 and more particularly paragraphs 10 to 12, 15 and 17 in support of the submission that under section 536(2) of the Companies Act any disposition of the property of the company which has been made after the commencement of winding up proceedings is void unless the court otherwise orders. He submits that unless the transaction is effected bonafide in the ordinary course of current business of company, such transaction cannot be vali .....

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plead and prove that the said transaction was made in ordinary course of business was bonafide and was in the best 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 .....

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led 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 536(2). He submits that even otherwise the said unregistered sublease is illegal under the provisions of Transfer of Property Act, 1882. He submits that the judgment of Calcutta High Court squ .....

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vision Bench of this court in case of The Superintendent of Stamps and Chief Controlling Revenue Authority, Bombay vs. Govind Parmeshwar Nair, 1967 Mh.L.J. 641 and in particular paragraphs 12, 13 and 15 in support of the submission that the transaction may amount to disposition of the property though it may not amount to the transfer of the property. The disposition is a word having much wider connotation than transfer. It is submitted that creation of sub-lease of the property in liquidation af .....

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transferring of the property to the care or possession of another also amounts to disposition. He submits that the creation of sub-lease in favour of Bharat Marketing handing over possession thereof to the sub-lessee amounts to disposition under section 536(2) of the Companies Act. 41. Learned counsel for the Official Liquidator also placed reliance on the Words and Phrases and more particularly on the word disposition. He submits that though the property can be dealt within one of the number o .....

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s 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 re .....

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b-lease. 44. It is submitted by the learned counsel for the Official Liquidator that since the sub-lease is created after commencement of the winding up which amounts to disposition of the property under section 441(2) of the Companies Act, 1956, it would be rendered void unless an application seeking validation of transfer is made. He submits that this Court has ample power to direct the Official Liquidator to take possession of the said immovable property which is in possession of Bharat Marke .....

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particular paragraphs 4, 9, 12, 14, 21, 23 to 26, 32 and 35. 45. Learned counsel for the Official Liquidator placed reliance on section 446(2)(d) and would submit that in view of the said non-obstante provision, the Company Court has jurisdiction to entertain or dispose of any suit or proceedings by or against the company, any claim made by or against the company or even any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or rise in the course .....

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oid or not, the said question can be decided by this Court itself under section 446(2)(d) of the Companies Act, 1956, He submits that any question relating to or arising in course of the winding up of the respondent company in liquidation can be decided by this Court 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 li .....

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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 to the Official Liquidator to take po .....

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Court delivered on 31st March, 2015 in case of Omkar Kanegaonkar vs. Deepak @ Gajanan Kanegaonkar & Ors. in Appeal (Lodging) No.688 of 2014 and in particular paragraphs 9 and 10. He submits that the Division Bench of this Court has held that since the purported lease agreement was unregistered document which was required to be registered and stamped under the provisions of section 34 of the Maharashtra Stamp Act, 1956 and section 17 read with section 49 of the Registration Act, 1908, the Com .....

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any Court has jurisdiction to entertain any question of priorities or any other question whatsoever whether of law or fact, which may relate to or arise in course of the winding up of the company. He submits that the Division Bench of this Court in the said judgment has upheld the judgment of the Company Court in the Official Liquidator's Report directing the Ex-directors to hand over vacant and peaceful possession of the premises to the company in liquidation to the Official Liquidator. 50. .....

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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 .....

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ters would renew the principal lease or would extend the principal lease period, both letters amounts to disposition of the property after commencement of the winding up and therefore, are void. It is submitted that this Court has ample powers under section 536(2) of the Companies Act to declare such disposition as void and thus the pendency of the suit filed by Bharat Marketing in the Small Causes Court, Bombay seeking a declaration of the alleged sub-tenancy/deemed tenancy is of no significanc .....

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he basis of the principal lease and sub-lease respectively. Both these parties have also placed reliance on the alleged letters thereby renewing the principal lease and sub-lease and have not claimed their alleged rights as tenants holding over. It is submitted that the said Bharat Marketing also in its declaratory suit filed before the Small Causes Court has claimed tenancy only on the basis of the alleged valid and subsisting sub-lease. Without prejudice to the aforesaid submissions, it is sub .....

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idator and thus acceptance of the rent in this situation cannot create any right, title or interest in favour of the alleged sub-lessee. 54. Mr. Samdhani, learned senior counsel for Modi Rubber Ltd. on the other hand submits that even if the Official Liquidator takes control of the assets of the company in liquidation, the assets do not vest in him. He submits that a relationship of lessor and lessee is subject to the terms of the lease deed and are governed by the Transfer of Property Act, 1882 .....

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cial 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 thu .....

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o the lease deed dated 30th September, 1997 entered into between the company in liquidation and Modi Rubber Ltd., the only prayer remains for adjudication is for declaration of the sub-lease as void and for possession of the property from the sub-lessee. He submits that as per the terms and conditions of the lease deed, the lease was valid for 10 years and 11 months i.e. till August 2008. He submits that the sublease was granted for the same period for which the lease was granted in favour of Mo .....

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is applied, the lessor cannot unreasonably withheld in the case of respectable and responsible party. He submits that it is not the case of the Official Liquidator that Bharat Marketing is not a respectable and responsible party. He submits that if the lessor unreasonably withholds the permission for creating any of the aforesaid rights in the property, the lessee is automatically relieved of the said obligation. It is submitted that the Official Liquidator has admitted the execution of the leas .....

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ween the company in liquidation and 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 .....

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ng 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, the rights of his client i.e. Modi Rubber Limited vis-a-vis the company in liquidation did not undergo any change. 59. It is submitted by the learned senior counsel that the lease agreement between the company in liquidation and Modi Rubber Limited is not in dispute. He .....

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submit that privity of contract continues between the sub-lessee and lessee and also between the lessee and the company in liquidation under the lease document of 1997. Learned senior counsel placed reliance on the judgment of the Gujrat High Court in the case of Kanubhai H. Prajapati and Ors. Vs. Official Liquidator & Ors., reported in (1999) 1 GLR 429 and in particular paragraphs 17 to 19 in support of his aforesaid submission. He also placed reliance on the judgment of the Delhi High Cour .....

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se would not amount to disposition of the property of the company in liquidation. 61. It is submitted by the learned senior counsel that the consent given in writing on 4th May 2002 by the company in liquidation which was post commencement of winding up was only an administrative formality of giving consent for the purpose of creation of sub-lease which consent was granted in view of the existing covenant of consent which was admittedly part of the lease document which was executed much prior to .....

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o 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 p .....

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at since the consent for subletting or granting the property on leave and license was already granted in the lease deed itself, there was no question of any disposition of the property of the company in liquidation and the provision of Section 536 (2) of the Companies Act, 1956 is thus not attracted to the facts of this case. He submits that in this case, sub-lessee was admittedly placed in possession of the said property by the lessee long back and since then the sub-lessee has been in possessi .....

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annot pass any order on the application of the official liquidator in this report for handing over possession of the property in question to the lessee or sub-lessee. Learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Pankaj Mehra & Anr. Vs. State of Maharashtra & Ors., reported in (2000) 2 SCC 756 and in particular paragraphs 7, 8, 14, 15, 17, 18 and 20 in support of the submission that since the sub-lease was granted in favour of Bharat Marketing .....

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he Companies Act, 1956. 65. Learned senior counsel placed reliance on an unreported judgment of this Court in the case of Pavlova Estates Private Limited Vs. MSTC Limited delivered on 9th May 2014 in Company 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 trans .....

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le 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 of State of U.P. & Ors. Vs. Lalji Tandon (dead), reported in AIR 2004 SC 32 and in particular paragrap .....

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. Between the head-lessor and the lessee, the relationship of landlord and tenant exist and the relationship of lessee and sub-lessee exist. Sub-lessee is in possession of the said premises and has been paying rent to the lessor directly. He placed reliance on the judgment of Supreme Court in case of Anthony vs. K.C.Ittoop & Sons and others (2000) 6 SCC 394 and in particular paragraphs 2 to 4, 8 to 14, 16, 18 and 20 and also placed reliance on section 107 of the Transfer of Property Act. He .....

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4 and 25 on the consequences of non-registration of a lease agreement. He submits that the tenancy was created orally. Learned senior counsel distinguished the judgment of Calcutta High Court in case of Prudential Capital Markets Ltd. (In Liquidation), In Re (2007) 140 Company Cases 754 (Cal) on the ground that in that judgment there were prohibitory orders passed by the Reserve Bank of India from transferring the property much before presentation of the winding up petition. He submits that in t .....

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ase. 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 t .....

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that this court has power under section 446(2) of the Companies Act to transfer the suit filed by the sub-lessee before the Small Causes Court. He submits that unless the said suit is actually transferred to this court, this court cannot decide the issue involved in that suit in this report submitted by the Official Liquidator. He submits that the Official Liquidator seeks possession of the tenanted premises in this report and transgressing the transaction of the Small Causes Court. He submits t .....

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tenancy in this report which is of a summary in nature. 72. Mr. Jagtiani, learned counsel for the Official Liquidator in rejoinder submits that under the provisions of Companies Act, 1956, it is the duty of the Official Liquidator to gather all the assets of the company in liquidation for the purpose of distribution of those assets amongst the secured and unsecured creditors and also the workers. The Official Liquidator acts as a trustee of the secured and unsecured creditors and workers. He su .....

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essee and the sub-lessee. The lessee has no interest of whatsoever nature today in the said premises. He submits that the right of lessee under section 108(j) of the Transfer of Property Act are subordinate to the special provisions under the Companies Act, 1956. 73. It is submitted that this court has to consider the interest of creditors and contributories and keep in mind the duties and responsibilities of the Official Liquidator while deciding this matter and not the alleged execution of the .....

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lleged 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 transa .....

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iquidator for the purpose of sale and for the purpose of distribution of the sale proceeds, the entire process of winding up would be frustrated. It is submitted that since the disposition of the property by the lessee with the alleged permission of the company in liquidation is after commencement of the winding up of the company in liquidation, it is void and hit by section 536(2) of the Companies Act. 75. It is submitted that the company in liquidation had made an attempt of revival before BIF .....

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he process of winding up. 76. In his alternate submission, learned counsel for the Official Liquidator submits that there was no provision in the lease deed that the said lessee Modi Rubber Ltd. was going to create any sub-lease in favour of Bharat Marketing or anybody else. It is submitted that the execution of the sub-lease by Modi Rubber Ltd. is not a continuation of a lease. There is no provision in the lease deed that the sub-lease has to be granted by the lessee in favour of a third party. .....

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) 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 all .....

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f this court in case of BIFR vs. Hindustan Transmission Products (In Liquidation) (supra), Sunita Vasudeo Warke (supra) and in case of judgment of Supreme Court in case of Pankaj Mehra and another vs. State of Maharashtra and others, (2000) 2 SCC 756. He submits that the burden is always on the party who seeks validation of the transaction to plead and the prove that the transaction was in the best interest of the company in liquidation and was bonafide. He submits that there is no such case ple .....

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ted which is now in liquidation and Modi Rubber Limited in respect of the property in question admeasuring about 3000 sq.ft and one garage in the basement of the building known as Normandie Co-operative Housing Society, situate at 25, Carmichael Road, Mumbai. The said lease was for a period of 10 years and 11 months commencing from 1st October 1997 and was to be in force till July 2008. Under clause 11 of the said lease deed, Modi Rubber Limited had agreed not to sublet, assign, underlet or part .....

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dent breach, non-performance or non-observance of any of the covenants, conditions, stipulations or obligations therein if Modi Rubber Ltd. had not made good the breach of covenant in respect of which the re-entry was intended within a reasonable time but not less than 30 days after receipt of such notice. 82. A perusal of the said lease deed clearly indicates that it was not intended in the said lease deed that lessee was permitted to give the said premises on sub-lease in favour of any third p .....

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n 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 .....

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vited my attention to some of the correspondence alleged to have been exchanged between the said Modi Stone Ltd, now in liquidation and Modi Rubber Ltd. on one hand and also the correspondence alleged to have been exchanged between Modi Rubber Ltd. And the Bharat Marketing. It is the case of Modi Rubber Ltd. that vide letter dated 1st October 1997, the said Modi Rubber Ltd. had brought to the notice of the said Modi Stone Ltd., now in liquidation that the said flat required renovation. It was al .....

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was desired by Modi Rubber Ltd. would cost around ₹ 50 lakh. The said Modi Stone Ltd. was not in a position to take that additional burden as it was going through a recessionary phase. It would not be possible for it to renovate the said flat at its cost. By the said alleged letter, Modi Stone Ltd. had alleged to have made a suggestion that if Modi Rubber Ltd. was agreeable to renovate the said flat at its own cost, the parties can come to some mutual understanding in respect of certain c .....

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g two more extensions beyond the stipulated period as contained in the lease deed dated 30th September 1997. 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 ackno .....

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cising 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 said letter dated 18th October 1997 whereby the Modi Rubber Ltd. was alleged to have been clothed with the right to extend the lease twice for similar period on the same terms and conditions as .....

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s in the sum of ₹ 54.35 lakh. The said letter also did not show any acknowledgment of Modi Stone Ltd. By the alleged letter dated 1st March 1998, Modi Stone Ltd. has acknowledged the receipt of the letter dated 11th February 1998 and alleged to have appreciated the investment of ₹ 54.35 lakh on the renovation work alleged to have been made by Modi Rubber Ltd. as the Modi Stone Ltd. was not financially in a position to undertake the said work. There is no acknowledgment of Modi Rubber .....

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red. Modi Rubber Ltd. did not produce any proof even before this Court to show that the delivery of various correspondence referred to the aforesaid alleged to have been exchanged with the Modi Stone Ltd. or to show that it had alleged to have incurred expenditure in the sum of ₹ 54.35 lakh on the alleged renovation work. Modi Stone Ltd. has repeatedly admitted that it was not financially in a position to undertake any work. Modi Stone Ltd. had already made an application under Section 15( .....

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e 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 .....

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91. It was alleged in the said letter that in the said sub-lease, it shall also be stated that in the event of Modi Rubber Ltd. surrendering the premises, Bharat Marketing would become the tenant of Modi Stone Ltd. and the tenancy would be subject to the terms and conditions as existing between Modi Stone Ltd. and Modi Rubber Ltd. 92. A perusal of these alleged letters dated 16th April 2002 and 4th May 2002 alleged to have been exchanged between Modi Rubber Ltd and Modi Stone Ltd. respectively .....

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93. On the date of the alleged permission sought by Modi Rubber Ltd. on 16th April 2002, the winding up petition was pending in this Court. The alleged permission for creating sub-lease was alleged to have conveyed to the Deputy General Manager (Finance) of Modi Stone Ltd. vide its alleged letter dated 4th May 2002. Even in the said alleged letter dated 4th May 2002, there was no reference to any alleged renewal lease period for 20 years alleged to have been exchanged between Modi Stone Ltd. an .....

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ter, @ ₹ 53,240/- per month. Admittedly, the said alleged sublease is not registered. 95. A perusal of the said alleged lease deed indicates that the alleged permission to grant the said premises on sub-lease by Modi Stone Ltd. was granted on 4th May 2002 i.e. much after the 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 que .....

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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 the reference is made by .....

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May 2002 and execution of the alleged sub-lease dated 20th May 2002 amounted to disposition of the property in question after commencement of the winding up. In this case, it is not in dispute that the said Modi Stone Ltd was ordered to be wound up by an order dated 25th July 2002 passed by this Court. The official liquidator was appointed by this Court on 25th July 2002. 99. Supreme Court in the case of NGEF Ltd. Vs. Chandra Developers Pvt. Ltd. (supra) has held that no formal application is r .....

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Court having found as not correct in which it was held by the Karnataka High Court that in the winding up proceeding in relation to a matter arising out of the recommendations of BIFR shall commence only on passing of an order of winding up of the company. Admittedly in this case, BIFR had recommended the winding up of the Modi Stone Ltd. on 25th April 2001 and thus the date of such recommendation made by the BIFR has to be considered as the date of commencement of the winding up of Modi Stone L .....

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erty 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 .....

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he date of commencement of the proceedings whether such commencement is on the basis of the petition filed by the creditor or it is on the basis of the opinion forwarded by the Board for Industrial and Financial Reconstruction. Once the petition is filed or the opinion is forwarded and it is registered as a company petition, the winding up proceedings commences. Gujarat High Court held in the said judgment that since the winding up proceedings were said to have been commenced in the year 1991 an .....

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supra) has construed the powers of the Company Court under Section 536(2) of the Companies Act, 1956. It is held by the Division Bench of this Court that in order to invoke Section 536(2) of Companies Act, by Court to "otherwise order", there had to be a disposition of property of company; a disposition which had been made after commencement of winding-up proceedings. This Court considered the judgment of the Supreme Court in the case of J.K. (Bombay) Private Limited Vs. M/s. New Kaise .....

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after be created and no uncompleted rights can be completed and doing so would be contrary to the creditors' right to have the proceeds of the assets distributed among them pari passu. 103. This Court has also adverted to the another judgment of the Division Bench of this Court in the case of Tulsidas Jasraj Parekh Vs. Industrial Bank of Western India, reported in AIR 1931 BOMBAY 2 in which it has been held by this Court that any bona fide transaction carried out and completed in ordinary co .....

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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 indi .....

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dicates that the said Modi Stone Ltd. itself has applied for declaration of the said company as sick under Section 15(1) of the SICA much prior to 15th April 1998. The said company was already declared as sick by the BIFR on 15th April 1998. The BIFR had already recommended the winding up of the said company as far back as on 25th April 2001. The appeal filed by Modi Stone Ltd. was also dismissed by AAIFR on 8th August 2001. This Court had already registered the winding up petition on 25th Janua .....

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of Bharat Marketing was not in the interest of the company in liquidation and such transaction could not be considered as a transaction in the ordinary course of business. The company in liquidation cannot be considered as beneficiary of the said alleged sub-lease in any manner whatsoever. 106. Be that as it may, Modi Rubber Ltd. as well as Bharat Marketing have failed to plead and prove that the said alleged sub-lease in favour of Bharat Marketing was in the interest of the company in liquidat .....

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nies Act, 1956 in 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 .....

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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 extension of lease period as alleged by Modi Rubber Ltd. in the favour of Modi Stone Ltd. is concerned, a perusal of the record indicates that Modi Rubber Ltd. has placed reliance on few letters alleged to have been exchanged between Modi Stone Ltd. and Modi Rubber Ltd. during the period between .....

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tember 1997. Copies of the alleged letters produced on record by Modi Rubber Ltd. does not show any acknowledgment of those letters. The said company also failed to produce any proof before this Court about the mode of delivery of those letters upon Modi Stone Ltd. In the Deed of Confirmation which was executed much later between the said Modi Stone Ltd. and Modi Rubber Ltd., there is no reference to any of these alleged letters exchanged between them purporting to extend period of lease at all. .....

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50 lakh later on. The said Modi Stone Ltd. had already applied under Section 15(1) of SICA before BIFR for declaration of the said company as sick around the same time. In these circumstances, in my view, there is substance in the submission made by the learned counsel for the official liquidator that all these letters alleged to have been exchanged between the parties were ante dated or were placed on record to defeat/ delay an action on the part of the official liquidator to take steps to rec .....

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bmission 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 .....

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s of the company shall be deemed to be in the custody of the court as from the date of the order for the winding up of the company. Under Section 457 of the Companies Act, 1956, the liquidator in a winding up by a Court shall have vast powers prescribed in the said provision. Under Section 458 of the Companies Act, 1956, the Company Court is empowered to pass an order after making up winding up order require any contributory, any trustee, receiver, banker, agent of the company, to pay, deliver, .....

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he relationship between the lessor and lessee is subject to the terms of the lease deed dated 30th September 1997 and are governed by the provisions of the Transfer of Property, 1882 is concerned, once an order of winding up is passed against one of the parties to such lease deed, those rights of the parties under the said lease deed are to be controlled and exercised by the official liquidator under the directions of the Company Court which powers are exercisable by the official liquidator unde .....

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dispute is concerned, in my view, there is no merit in this submission of the learned senior counsel. Under Section 455 of the Companies Act, 1956 read with Rule 135 and 137 of the Companies (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 .....

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ay 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 report submitted by the official liquidator. The powers exercised by the Company Court by issuing such directions and/or o .....

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be the nomenclature of the proceedings i.e. whether by way of the official liquidator's report or by way of company application for seeking various directions including the relief for recovery of possession, powers of the Company Court are the same. 117. This Court has passed large number of such orders for recovery of possession applied for by the official liquidator against the Ex-directors of the company in liquidation and third parties on such reports filed by the official liquidator be .....

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ot only seeking permission to take possession of the property of the company in liquidation but also seeking declaration that the sale of the property to a third party was null and void. 118. Division Bench of this Court in the case of Sunita Vasudeo Warke Vs. Official Liquidator (supra) had passed the said order in appeal arising out of the official liquidator's report seeking a declaration that the sale of the immovable property of the company in liquidation was null and void and seeking a .....

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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 C .....

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in writing which could not have been withheld unreasonably by the lessor and thus based on such permission granted in the lease deed itself, the Modi Rubber Ltd. could have created sub-lease in favour of Bharat Marketing and the same could not be considered as in violation of clause 11 of the lease deed is concerned, it is not in dispute that the said Modi Rubber Ltd. did not apply for any such permission in writing from the company in liquidation prior to the date of commencement of the windin .....

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g property on sub-lease was already granted in the lease deed dated 30th September 1997 itself. There was no automatic permission granted under the said lease deed for creating sub-lease as canvassed by the learned senior counsel for Modi Rubber Ltd. This submission is ex facie untenable and is rejected. 121. A perusal of the said alleged application/letter dated 16th April 2002 from Modi Rubber Ltd. to Modi Stone Ltd. also indicates that the said permission was applied by invoking Indenture of .....

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1997 that at that point of time, if Modi Rubber Ltd. would propose to grant any sub-tenancy in favour of the Bharat Marketing or any third party, such permission was already granted in anticipation of creating such subtenancy in favour of the Bharat Marketing or any other party in the said lease deed dated 30th September 1997 itself. The submission of the learned senior counsel for Modi Rubber Ltd that in the lease deed dated 30th September 1997 itself, such permission was granted or deemed to h .....

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pplication 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 Ro .....

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disposition of the property including actionable claims after commencement of the winding up as void are very wide. In this case, even according to the Modi Rubber Ltd. and Bharat Marketing, the permission was sought by Modi Rubber Ltd. for creation of sub-lease in favour of Bharat Marketing in writing only on 16th April 2002 and was alleged to have been granted by Modi Stone Ltd. only on 4th May 2002 which was much after commencement of the winding up against the company in liquidation i.e. 25 .....

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f the lease deed was sought if according to his client, the permission for creating sub-lease was deemed to have been granted in clause 11 of the lease deed dated 30th September 1997 itself. 125. Be that as it may, the alleged documents produced by Modi Rubber Ltd. and Bharat Marketing itself would defeat their case and would ex facie indicate that the same are back dated and the case of sublease in favour of Bharat Marketing is ex facie false and untenable. 126. Insofar as the judgment of the S .....

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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 t .....

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fferent and are clearly distinguishable. The said judgment, in my view, would not assist the case of Modi Rubber Limited. It is not the case of the Official Liquidator that he has become super landlord in view of the company in liquidation being the owner of the said property is ordered to be wound up. Be that as it may, the company in liquidation being the owner of the said property has been ordered to be wound up and thus all the assets of the company in liquidation, including the suit propert .....

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company is dissolved. It is held by the Gujarat High Court that even if the company has closed its business and the premises are not required for the purpose of carrying on business, still the Official Liquidator is entitled to retain the possession if it is required by him during the course of winding up for the purpose of company's affairs. The leasehold tenancy rights under a lease are the assets of the company which may be dealt with and transferred if the Official Liquidator is required .....

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misplaced. 129. In my view, there is no substance in the submission of the learned senior counsel for Modi Rubber Limited that even if any breaches are committed by Modi Rubber Limited or by the company in liquidation, there is no consequence of any such alleged breach in view of the fact that there is no right of re-entry provided in the lease deed. A perusal of the lease deed executed between the company in liquidation and Modi Rubber Limited and more particularly clause IV on page 7 of the s .....

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ing 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. (sup .....

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during the pendency of the winding up petition in as much as necessary sanction of the Collector was received during that period. Prior to the presentation of the winding up petition, a third party was already put in possession of the property and the said purchaser had already parted with substantial amount in pursuance of the contract already concluded. In these circumstances this Court held that the impugned transaction was not affected by the provisions contained in section 536(2) of the Co .....

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clearly distinguishable in the facts and circumstances of this case. In this case, admittedly Bharat Marketing, who claims to be the sub-lessee was put in possession much after the commencement of the winding up proceedings against the respondent company in liquidation. Even the so called permission to create sub-lease in favour of Bharat Marketing was also alleged to have been granted by the company in liquidation much after the commencement of the winding up proceedings. The execution of sub-l .....

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ny in liquidation in good faith and with honest intention and such transaction if being just and fair while passing 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 .....

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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 Court by exercising the powers under section 536(2) of the Companies Act, 1956. 134. Insofar as the judgment of the Supreme Court in case of State of U.P. & Ors. vs. Lalji Tandan (supra) rel .....

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rusal of the alleged documents and correspondence brought on record by Modi Rubber Limited which were alleged to have been exchanged between the company in liquidation and Modi Rubber Limited, this Court is clearly of the view that those letters are anti dated and were not even referred in the subsequent documents entered into between the parties. 135. In my view, there is no substance in the submission made by the learned senior counsel for Modi Rubber Limited that even if it is considered that .....

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cy therefore, did not arise. 136. Insofar as the submission of the learned senior counsel for Modi Rubber Limited and the submission of Mr.Balsara for Bharat Marketing that Bharat Marketing has been paying the rent directly to the Official Liquidator which indicates the existence of the tenancy rights in favour of Bharat Marketing is concerned, a perusal of the record clearly indicates that the Official Liquidator has been permitted by this Court to accept the rent directly from Bharat Marketing .....

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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 th .....

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ght as tenant holding over or tenant at sufferance. 139. Insofar as the judgment of the Supreme Court in case of Vilas M. Kalsaria (supra) relied upon by Mr.Samdhani, learned senior counsel for Modi Rubber Limited is concerned, it is held by the Supreme Court that section 106 of the Transfer of Property Act, 1882 does provide for registration of leases which are created on a year to year basis. According to section 106 of the Transfer of Property Act, 1882, monthly tenancy shall be deemed to be .....

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ng such evidence in the proceedings under section 14 of the SARFAESI Act before the learned Magistrate. In the said judgment, the Supreme Court held that once the tenancy is created, a tenant can be evicted only after following due process of law as prescribed under the provisions of the Rent Control Act and cannot be arbitrarily evicted by using the provisions of SARFAESI Act. 140. In the facts and circumstances of this case, it is not the case of Modi Rubber Limited or Bharat Marketing that Bh .....

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his Court has ample power to consider the alleged rights of Bharat Marketing while considering an issue whether the said transaction of the alleged sub-lease which is entered into after commencement of the winding up proceedings is void or not. 141. Insofar as the submission of Mr.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 .....

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eting 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 report submitted by th .....

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e is no merit in this submission of the learned counsel. Under section 446 (2) of the Companies Act, 1956, notwithstanding anything contained in any other law for the time being in force, the Court has jurisdiction to entertain, or dispose of any suit or proceeding by or against the company, any claim made by or against the company and is also empowered to decide any question of priorities or any other question whatsoever, where of law or fact which may relate to or rise any course of winding up .....

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r Bharat Marketing that the complicated finding of fact cannot be rendered by this Court by exercising powers under section 446 or under section 536(2) of the Companies Act, 1956. In my view, the Small Causes Court under section 41 of the Bombay Presidency Small Causes Court Act cannot decide the issue as to whether disposal of the property of the company by the company in liquidation or by a third party was after the commencement of the winding up or was otherwise and can declare such transacti .....

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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 .....

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cured creditors, the workers and contributories. The rights of the company in liquidation are subordinate to the powers of the Official Liquidator under the provisions of the Companies Act, 1956. It is the duty of the Official Liquidator to gather all the assets of the company in liquidation for the purpose of distribution of those assets, amongst secured or unsecured creditors, workers, contributories and others prescribed under the provisions of the Companies Act, 1956. In my view, the rights .....

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y Modi Rubber Limited was not only a bonafide transaction but was in the interest of the company in liquidation and also that the said transaction was carried out in ordinary course of business by the company in liquidation. It is not in dispute that it was not the business of the company in liquidation to grant property of the company on lease or sub-lease. Modi Rubber Limited as well as Bharat Marketing have failed to plead and prove that the transaction was a bonafide transaction and was in t .....

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arpet area in posh locality situated at Carmichael Road used for commercial purposes, is ex-facie fraudulent and could never be considered as bona fide and in the interest of and for the benefit of the company in liquidation. The question of validating such fraudulent transaction by exercising the powers of this Court under section 536(2) in these circumstances in favour of Modi Rubber Limited or in favour of Bharat Marketing does not arise. Modi Rubber Limited has not disputed the case of the O .....

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) 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 a .....

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kept uppermost in consideration. 149. This Court in case of Member of Industrial & Financial Reconstruction vs. M/s.Hindustan Transmission Products Limited (supra) and M/s.Intec Polymee Limited (supra) has held that while validating a transaction, the Court has to consider that the transfer must be for the best interest of the company. Neither Modi Rubber Limited nor Bharat Marketing have made out any case for holding that the alleged sub-lease in favour of Bharat Marketing by Modi Rubber L .....

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sposition is of much wider connotation than the word transfer . The transaction may amount to disposition of the property though it may not amount to transfer of the property. The dictionary meaning of expression disposition as per Black's Law Dictionary, means an act of disposing, transferring to the care or possession of another, parting with, alienation of, or giving up property. The meaning of disposition as per Words and Phrases is 'in relation to any freehold or leasehold estate, m .....

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hus the said provision would be attracted 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 prope .....

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