Important Point - The disposition of its properties and the effects made by a company after commencement of the winding up is covered by section 536(2) of the Companies Act, 1956.

1. The Official Liquidator has placed this official liquidator'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 the course of the arguments, learned counsel for the official liquidator, however, did not press any relief in so far as declaration of lease deed dated 30th September 1997 executed between the company in liquidation and Modi Rubber Limited as void but pressed only for the relief in so far as the sub-lease dated 20th May 2002 executed between Modi Rubber Limited and Bharat Marketing is concerned. Some of the relevant facts for the purpose of deciding this report are as under :-

3. On 30th September 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, Mumbai- 400 026 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 with possession of the demised premises or any part thereof or permit the same to be used on leave and license or caretaker or any other basis without the previous consent in writing of Modi Stone Ltd. which shall not be unreasonably withheld in case of a respectable and responsible party. Clause 13 of the said lease deed provided that lessee shall peaceably surrender yield up and deliver up the demised premises at the end or on sooner determination of the said term together with all the additions 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 covenants, conditions, stipulations or obligations therein contained. It is further provided that the lessor shall have given a notice to the lessee in writing to make good the breach of covenant in respect of which the re-entry is intended and if failed to do so within a reasonable time but not less than 30 days after receipt of such notice. The said lease deed was not registered. The lease period mentioned in the said document was for the term of 10 years and 11 months commencing from 1st October 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 letter requested Modi Stone Limited to convey its decision in the matter.

7. It is the case of Modi Stone Limited that by letter dated 7th October 1997, Modi Stone Limited informed Modi Rubber Limited that if Modi Rubber Limited agrees to renovate the said flat at its own costs, the parties can come to some mutual understanding in respect of certain clauses in the lease deed. By letter dated 12th October 1997, Modi Rubber Limit