The entitlement of the licensor to adjust the security deposit towards unpaid arrears and the priority of license fees for the post-winding up period as liquidation expenses.

S.C. GUPTE, J.

1. The Company Application is for direction to the Official Liquidator to vacate and/or shift goods and materials of the Respondent Company, if any, lying in, Gala No. 17, Building No. A9, Harihar Corporation, Village Dapode, Bhiwandi, District Thane and to handover physical and vacant possession of the premises to the Applicant. The Applicant is the owner of the premises. Under an agreement of leave and licence dated 30 July 2014, the Applicant gave the premises on licence to the Respondent Company. The licence period was three years from 1 August 2014 to 31 July 2017. The licence fee was Rs. 24,425/- per month. The Respondent Company kept a deposit of Rs. 72,675/- with the Applicant as and by way of security deposit for fulfillment of the terms and conditions of the licence agreement. It is the Applicant's case that the Official Liquidator, who is in possession of the premises as a liquidator of the Respondent Company, does not require the premises for beneficial winding up and should be asked to handover vacant and peaceful possession thereof to the Applicant after removing the goods, if any, lying within the premises.

2. The Official Liquidator has filed a reply to the Company Application submitting inter alia that the Official Liquidator may either dispose of the movables lying in the premises by public auction or, in the alternative, shift the furniture, fixtures and records lying within the premises to another property of the Company in liquidation, which is already in possession of the Official Liquidator.

3. The only debatable question is of payment of licence fees to the Applicant. Learned Counsel for the petitioning creditor opposes the Applicant's prayer for payment of arrears of licence fee. He submits that as far as the arrears are concerned, the Applicant, as unpaid licensor of the Company in liquidation, is really in the position of an unsecured creditor and cannot get any priority in payment over the secured creditors and workmen. Learned Counsel relies upon the judgments of the Supreme Court in the case of Official Liquidator of High Court of Karnataka vs. Smt. V. Lakshmikutty, (1981) 3 SCC 32 and of the Delhi High Court in Amersey Industries & Exports vs. CRB Capital Markets Limited, ILR (2004) 2 Delhi 782, in support of his submissions.

4. As far as the arrears of licence fees for the period prior to the order of winding up are concerned, it is no doubt correct that the Applicant, as a licensor of the Company, can at the most adjust the security deposit held by it against unpaid licence fee, but for the balance, if any, after such adjustment, it is an unsecured creditor and must avail its turn in liquidation for recovery of its dues in accordance with the law of priorities of debts in liquidation. But if, in the course of winding up, that is to say, after the passing of the winding up order but before the Company is actually wound up, the Official Liquidator requires and uses the premises for beneficial winding up, the licence fees payable during the period of such beneficial use must rank as liquidation expenses and be accorded top priority, i.e. even over the priority claims under Sections 529A, 529 and 530 of the Companies Act, 1956.

5. In the present case, the Company was ordered to be wound up and the Official Liquidator was appointed as its liquidator on 2 September 2014. The licence agreement was executed before this order. The licence fees claimed to be due are from September 2014 till the filing of this application and thereafter till delivery of possession of the premises, that is to say, entirely for a period after the winding up order. It is not disputed by the Official Liquidator that all throughout this period, during which the Liquidator was in possession thereof, the premises were required to store the movable assets of the Company so as to enable the Liquidator to make a valuation and bring the same to sale with a view to accomplish administration of assets in winding