The termination of lease by operation of law and the financial instability of the respondent-company justified the winding up order.

H.N. Nagamohan Das, J.—In this petition filed under Section 433(e) and (f) of the Companies Act, 1956 the Petitioner is praying for an order to wind up the Respondent-company.

2. Petitioner-company contends that under an agreement of lease dated 24-12-2004 as per Annexure A they have taken on lease the premises bearing No. 26-27, Mahatma Gandhi Road, Bangalore and also the furniture and fixtures. Under a separate agreement for security deposit dated 24-12-2004 the Respondent-company has received and acknowledged the security deposit of Rs. 18,26,000 from the Petitioner -company.

3. During the subsistence of this lease, the secured creditor of the Respondent-company by name The Tamilnadu Industrial Investment Corporation Limited invoked the provisions of State Financial Corporations Act, 1951 and sold the premises and furniture in question by way of public auction. In the said public auction the Petitioner -company participated and became successful bidder for a sum of Rs. 2,30,00,000. On payment of sale consideration, the secured creditor has executed a registered sale deed in favour of the Petitioner -company on 14-6-2007 as per Annexure D.

4. According to the Petitioner, on execution of sale deed dated 14-6-2007, their inferior right of lease merged with their superior right of sale. Consequently the Petitioner -company called upon the Respondent-company to refund the security deposit of Rs. 18,26,000. The Petitioner -company got issued a statutory notice on 19-6-2009 as per Annexure L calling up the Respondent-company to pay and refund the security deposit of Rs. 18,26,000 together with interest. The Respondent-company in its reply dated 26-6-2009 denied the liability to refund the security deposit. The Respondent-company contends that the lease in favour of the Petitioner -company is not terminated. The Petitioner -company has not returned the furniture leased to them and therefore the question of refunding the security deposit will not arise. Therefore the Petitioner is before this Court in this petition.

5. Heard arguments on both the side and perused the entire petition papers.

6. The Respondent-company was the owner of premises and furniture in question is not in dispute. Further it is not in dispute that under a lease deed dated 24-12-2004 as per Annexure A the Respondent-company leased the premises and furniture on rental basis to the Petitioner. Further it is not in dispute that under an agreement of security deposit dated 24-12-2004 as per Annexure B Respondent-company acknowledged the receipt of security deposit of Rs. 18,26,000. It is also not in dispute that the secured creditor by name Tamilnadu Industrial Investment Corporation Limited invoked the provisions of State Financial Corporations Act and sold the leased premises and furniture in a public auction in favour of the Petitioner -company. Thus by operation of law the lease between the Petitioner and Respondent-company came to be terminated. This is also the finding of this Court in its order dated 7-10-2009 while admitting this petition. Therefore the contention of the Respondent-company that the lease between the parties is not terminated is not acceptable to me.

7. Learned Counsel for the Respondent-company further contends that what was mortgaged in favour of the secured creditor - Tamilnadu Industrial Investment Corporation Limited was only the premises in question by way of deposit of title deeds and not the furniture. It is seen from the record that the Petitioner -company along with the rejoinder filed a search report by the Company Secretary as per Annexure P. This report specifies that there was a floating charge on the movables belonging to the Respondent-company towards the credit advanced by the secured creditor-Tamilnadu Industrial Investment Corporation Limited. A Division Bench of Allahabad High Court in the case of Krishna Deva Bhargava and Others Vs. Official Liquidator U.P. Oil Industries Ltd., AIR 1962 All 101 held as under:

(5) A floating