2006 Supreme(SC) 463

2006(4) Supreme 229
SUPREME COURT OF INDIA
(From Kolkata High Court)
H.K. Sema and Dr. AR Lakshmanan, JJ.
Board of the Trustees, Port of Kolkata—Appellant
versus
Efclon Tie-up Pvt. Ltd and Ors.—Respondents
Civil Appeal No. 2528 of 2006
(Arising out of SLP (Civil) No. 571/2005)
Decided on 8-5-2006
Counsel for the Parties :
For the Appellant : T.R. Andhyarujina, Sr. Advocate, Ms. Anuradha Priyadarshni, Ms. Swati Grover, Ms. Sonia Dube, Ms. Indra Sawhney, Advocates.
For the Respondents : U.U. Lalit, Vijay Hansaria, Sr. Advocate, Jishnov Saha, B.K. Satija, Dhruv Mehta, Harshvardhan, Yashraj Deora for M/s. K.L. Mehta & Co., Sushil K. Tekriwal, Triloki Nath Razdan Advocates.

Headnote:Kolkata Port Trust Act—Renewal of lease in favour of a company—Object of reviving and rehabilitating its units and to re-employ its workmen thereof—A lease was entered into by the company and the Kolkata Port Trust in respect of premises—Lease deed stipulated that lease was for a period of 29 years on a monthly rent basis—Lessee may have the option of a fresh lease for a further term of 30 years provided a notice stating the same was given to the Port Trust at least six months before expiration of subsisting lease—It was clearly stipulated that if the company goes into liquidation or is wound up compulsorily or voluntarily, the Port Trust would re-enter possession and the lease would be brought to an end—Lease expired on 22-1-1992 by efflux of time—Company not having paid their outstanding dues, was in breach of the stipulations in the lease deed—In liquidation proceedings, respondent 1 purchased assets of the liquidated company—Claim made for renewal of lease in terms of agreement that existed between the liquidated company and the Port Trust—Whether High Court was justified in granting a fresh lease to respondent 1 on terms specified in the original lease—(No)—Grant of lease on payment of all arrears and dues with interest.

       Held : The lease could not be granted to respondent No. 1 - Efclon Tie-up Private Limited for the following reasons:-

       1.The option to renew the lease was not validly exercised by the Company in liquidation. The Company was in breach of various terms and conditions of the indenture of the lease, inter alia, relating to non-payment of rent, municipal taxes, unauthorized construction of land in question etc.;

       2.M/s Efclon Tie-up Private Limited were the auction purchasers of only the assets of the company (fixtures and furnitures) lying, inter alia, in the premises in question. It was incorrect to assume that a further right to renew the lease deed vested in M/s Efclon Tie-up Private Limited;

       3.M/s Efclon Tie-up Private Limited were not the successors in interest of the Company in liquidation qua the right to renew the lease deed;

       4.It was the admitted position that the lease deed came to an end in 1992 and no renewal was granted thereon, particularly, since the right to grant renewal was in the discretion of the Port Trust, such discretion existed even if the terms and conditions of the indenture of the lease had not been breached by the Company in liquidation;

       5.In all fairness the Port Trust had agreed to the grant of a fresh lease to M/s Efclon Tie-up Private Limited as per the prevailing rates in the schedule of rates in the Port Trust which was unacceptable to the said Company which wanted renewal at the rates prescribed in the lease deed. (Para 23)

       We are of the opinion that:

       1.There is no right over the property of the Port Trust existing with the respondent No.1 (Efclon) as claimed by them. In the present case only the assets of the company which was liquidated has been bought by the respondents, the land belonged to the Port Trust. Even according to the original indenture of lease between the Port Trust and the liquidated company, there were clauses which very clearly stated that, the Port Trust had the option, of renewing the lease for such further period, provided the covenant conditions are duly performed. It was also clearly stipulated in the Lease deed that, if the company goes into liquidation or is wound up compulsorily or voluntarily, the Port Trust would re-enter possession and the lease would be brought to an end. In the present fact situation, the company in liquidation was clearly in breach of the covenant conditions by having outstanding rental dues and tax liability with interest. Also the company did go into liquidation and therefore as the lease indenture says, the original lease has come to an end and the Port Trust is presumed to have automatically come into possession of the land in question.

       Therefore we hold that, there is no lease that is subsisting between the Port Trust and the liquidated company and hence the respondent No. 1 (Efclon) claim that the original lease deed is subsisting thereby giving them an automatic right to the land in question is untenable and has no merit.

       2.To the question as to whether the High Court was correct in granting a fresh lease to the respondent No. 1 (Efclon) in accordance with the clause stipulated in the original lease agreement, we are of the opinion that the High Court is correct as far as the grant of fresh lease is concerned. Coming to the second part of the question as to whether the rental amount should be based on the stipulation mentioned in original lease deed is concerned; we believe that the rates that are present in the current Schedule of the Port Trust Act in Kolkata should apply. We are of the view that, the claim of the respondent that they should be allowed to pay the rates in accordance to the clause in the original lease indenture of 1962 is not fair on the Port Trust. Also we are satisfied that the prices that are prevalent in the schedules of the Port Trust Act are not based on profiteering, but on inflationary tendencies.

       3.With regard to the respondent No. 1’s (Efclon) claim of, if Das Reprographics had not gone into liquidation, while renewing the lease, the company would have only had to pay 25% over and above the last rent paid under the original lease for the period of renewal of the same, does not hold good in our view, as such a renewal need not be contemplated at this point, as the company itself is not in existence and also the clause in the original lease indenture will come in the way which specifically mentions that if the company goes into liquidation or is wound up compulsorily or voluntarily, the Port Trust would re-enter possession and the lease would be brought to an end. (Para 28)

       The fact remains that respondent No. 1 Company remained in possession of the property. It has now come to the knowledge of the Port Trust that despite the fact that no right over the property existed in favour of respondent No. 1. They are not only carrying out unauthorized constructions in the premises but have also parted with the possession to various individuals and companies not connected with their own business and are creating third party rights. Such construction and part of the possession is not only impermissible in view of the order of stay granted by this Court but in any event was not even permitted under the lease of 1964.(Para 31)

       Social justice demands that the lease in respect of the factory premises be renewed by the Port Trust in favour of respondent No. 1 so that the operation of the factory thereof can be commenced. However, the lease can be renewed only subject to the payment of all the arrears and dues together with interest. We are, therefore, inclined in the larger interest of the industry as also the workmen and of the Port Trust to direct the Port Trust to grant a fresh lease to respondent No. 1 herein subject to the respondent No. 1 complying with the terms relating to the payment of the arrears/dues together with interest at the rate of 15% p.a. as suggested by the Kolkata Port Trust in its letters dated 07.03.1992 and 13.04.1995. The Port Trust shall also grant a fresh lease in favour of respondent No. 1 on the basis of the scheduled rate from the date of possession i.e. 04.08.2003. In conclusion, we order a fresh lease indenture to be drawn from the date the company came into possession of the land (i.e. 04.08.2003) between the Port Trust and the Respondent No. 1 (Efclon) with regard to the premises situated at P-10, Taratola Road, Kolkata at the rental rates contained in the present Schedule of the Kolkata Port Trust Act as soon as the dues of the liquidated company are discharged with by the respondents.(Paras 34 and 35)