A statutory tenancy in business premises is transferable under the notification issued under the Bombay Rent Act, 1948, and the Official Assignee can sell such tenancy rights along with the business as a going concern.

Headnote:
INSOLVENCY - TENANCY RIGHTS - TRANSFERABILITY - STATUTORY TENANCY - BOMBAY RENT ACT, 1948 - SECTION 15(1) - NOTIFICATION DATED 24-9-1948 - INTERPRETATION - WHETHER STATUTORY TENANCY OF BUSINESS PREMISES IS TRANSFERABLE UNDER THE NOTIFICATION - WHETHER OFFICIAL ASSIGNEE CAN SELL STATUTORY TENANCY RIGHTS ALONG WITH BUSINESS AS A GOING CONCERN - SECTION 17 OF THE PRESIDENCY TOWNS INSOLVENCY ACT - LEAVE TO FILE SUIT - WHETHER COURT CAN EXAMINE MERITS OF CASE TO DECIDE WHETHER LEAVE SHOULD BE GRANTED OR REFUSED.
Fact of the Case:

The Official Assignee sought directions regarding the sale of the insolvent's business as a going concern, including tenancy rights, stock-in-trade, and goodwill, in light of the landlord's termination of the tenancy. The landlord argued that the tenancy had been terminated and that the Official Assignee only had a personal right of occupation as a statutory tenant under the Bombay Rents, Hotel and Lodging House Rates Control Act (Rent Act). The Official Assignee contended that the statutory tenancy was transferable under the notification issued under the Rent Act, allowing the sale of business premises as a going concern.
Finding of the Court:

The court held that a statutory tenancy in business premises is transferable under the notification issued under the Rent Act. The court reasoned that the Supreme Court's decision in Damadilal v. Parashram, which held that a statutory tenant has an interest in property and not merely a personal right to retain possession, should be preferred to the earlier decision in Anand Nivas Pvt. Ltd. v. Anandji Kalyanjini Pedhi, which held that a statutory tenant has only a personal right of occupation. The court also found that the landlord had not made out a prima facie case for filing a suit in ejectment against the Official Assignee and refused leave under section 17 of the Presidency Towns Insolvency Act.
Issues: 1. Whether a statutory tenancy of business premises is transferable under the notification issued under the Rent Act. 2. Whether the Official Assignee can sell statutory tenancy rights along with the business as a going concern. 3. Whether the court can examine the merits of a case to decide whether leave should be granted or refused under section 17 of the Presidency Towns Insolvency Act.
Ratio Decidendi: 1. The court held that a statutory tenancy in business premises is transferable under the notification issued under the Rent Act because: - The Supreme Court's decision in Damadilal v. Parashram held that a statutory tenant has an interest in property and not merely a personal right to retain possession. - The notification issued under the Rent Act permits the transfer of business premises in certain circumstances. - A different interpretation would enable a dishonest insolvent to collude with the landlord to deprive creditors of valuable property. 2. The court held that the Official Assignee can sell statutory tenancy rights along with the business as a going concern because: - The notification issued under the Rent Act allows the sale of business premises as a going concern. - Such tenancy rights are transferable if sold along with the business as a going concern together with its stock-in-trade and goodwill. 3. The court held that the court can examine the merits of a case to decide whether leave should be granted or refused under section 17 of the Presidency Towns Insolvency Act because: - Granting leave is a matter of discretion of the Court. - To properly exercise this discretion, the Court can examine the case to see if a prima facie case is made out on the merits for granting leave.
Final Decision: The court directed the Official Assignee to sell the insolvent's business as a going concern, including tenancy rights, stock-in-trade, and goodwill, to the highest bidder. The court also refused the landlord's application for leave to file a suit in ejectment against the Official Assignee.

JUDGMENT - Mrs. SUJATA V. MANOHAR, J.:---The present report of the Official Assignee dated 24th January, 1977 is in respect of the sale of right, title and interest of the insolvents in the business known as M/s. Hargovind Dharamsey Co. situate at 344, New Nagpada, Road, Bombay 8 as a going concern together with stock-in-trade, goodwill and benefit of tenancy rights. On 2-7-1975 an order of adjudicating was, made against the firm of M/s. Hargovind Dharamsey Co. and its partners. As a result all the estate and effects of the insolvents have become vested in the Official Assignee.

2. On the date when the order of adjudication was made the debtors were contractual tenants of the business premises in question. Earlier, on 12th April, 1962 the landlord had given a notice to quite to the debtors and had filed a suit in the Court of Small Causes at Bombay for ejecting then. Admittedly, however, the suit was compromised. Under the consent terms the debtors had continued as contractual tenants of the suit premises right till the date of their adjudication. Therefore, what vested in the Official Assignee was the contractual tenancy in respect of the shop premises.

3. After the order of adjudication the landlord served three notices all dated 24th September, 1975 on the Official Assignee asking him to pay the arrears of rent and terminating his tenancy. The three notices pertain to the three premises where business was carried on by the insolvents prior to the order of adjudication viz. shop premises at 344, New Nagpada Road, Bombay-8 shop premises at 346, New Nagpada Road, (together constituting the shop) and a godown adjoining these premises. On receipt of these notices terminating his tenancy, the Official Assignee made a report of the Insolvency Court dated 11th November, 1975 asking for directions. The notice of hearing of this report was given to the parties concerned including the landlord. The landlord, however, chose not to appear before the Court. On 18th November, 1975 the learned Insolvency Judge passed the following order :

"P.C.: Notice terminating tenancy dated 24th September, 1975 not binding on Official Assignee. Official Assignee is permitted to sell the business as a running concern with benefit of the tenancy rights."

Thereafter on 3rd April, 1976 the landlord made an application asking for leave under section 17 of the Presidency Towns Insolvency Act to file a proposed suit for ejectment against the insolvents firm and the Official Assignee. The application came for hearing on several occasions before the Insolvency Court and was adjourning from time to time. The landlord submitted to the Court a draft of the plaint of the proposed suit. It may be noted that the landlord himself offered on various occasions during the pendency of this application to purchase the premises and the matter was adjourned from time to time for this purpose. Ultimately the landlord made an offer of Rs. 26,046/- for these premises. On 6th September, 1976 this application for leave under section 17 was withdrawn by the landlord with liberty to file a fresh application if so advised. Thereafter on 9th November, 1976 the landlord again made an application for leave under section 17 of the Presidency Towns Insolvency Act for filing the proposed suit for ejectment against the insolvents-firm and the Official Assignee. In the affidavit dated 9th November, 1976 the landlords have stated that they "were granted leave to file a fresh application upon the same Cause of Action if they were so advised. Accordingly the applications are preferring the present application".

4. Mr. Daruwala, who appears for the landlords, also stated that the suit proposed to be filed by the landlord was substantially in the of draft which was earlier submitted by them to the Court. This application is also before me for consideration alongwith the report of the Official Assignee.

5. On the report the Official Assignee seeks directions regarding the sale of the above busin

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