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2017 Supreme(Bom) 760
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
The Provident Investment Company Ltd. - Applicant
In The Matter Between
M/S. Mukund Limited - Petitioner
Versus
M/S. Devidayala Industries Limited - Respondent
Company Application (L) No. 634 Of 2016 In Company Petition No. 600 Of 1997, 345 Of 2002 With Company Petition No. 345 Of 2002 Alongwith Official Liquidator's Report No. 610 Of 2015/Liquidation-Vi B.I.F.R. Case No. 146 Of 1997
Decided On : 23-06-2017
For the Petitioner:Mr.P.S.Dani, Senior Advocate, a/w. Bhushan Walimbe, Mr.Rupesh Bobde
For the Respondent: Ms.Yogini D.Chauhan, Deputy Mr.Prathamesh Kamath
The leasehold rights in favor of a company in liquidation do not come to an end by operation of law due to the winding up of the company and the Official Liquidator has the power to sublet or otherwise part with possession of the property for the beneficial use of the winding up.
Headnote:
COMPANY - WINDING UP - LEASEHOLD PROPERTY - POSSESSION - OFFICIAL LIQUIDATOR - LESSOR - ARREARS OF RENT - SALE OF LEASEHOLD PROPERTY - STATUS QUO ORDER - TRANSFER OF PROPERTY ACT, 1882, SECTION 108(J) - COMPANIES ACT, 1956, SECTIONS 456, 457, 481, 535 - BOMBAY RENT ACT, 1947 - MAHARASHTRA RENT CONTROL ACT, 1999.
Fact of the Case:
The Official Liquidator of a company in liquidation sought directions to reduce the reserve price fixed by the court for the sale of a leasehold property belonging to the company. The lessor of the property filed an application seeking an order to hand over possession of the property and payment of arrears of rent. The lessor contended that the lease had come to an end by operation of law due to the winding up of the company and that the Official Liquidator had no right to assign or sublet the property. The Official Liquidator argued that the lease was still subsisting and that he had the power to sublet or otherwise part with possession of the property for the beneficial use of the winding up.
Finding of the Court:
The court held that the leasehold rights in favor of the company in liquidation were valuable assets and could not be directed to be returned to the lessor merely because an order of winding up had been passed. The court further held that the Official Liquidator could sublet or otherwise part with possession of the property for the beneficial use of the winding up, subject to the terms of the lease agreement. The court also directed the Official Liquidator to pay the arrears of rent to the lessor.
Issues: 1. Whether the leasehold rights in favor of the company in liquidation came to an end by operation of law due to the winding up of the company? 2. Whether the Official Liquidator had the power to sublet or otherwise part with possession of the property for the beneficial use of the winding up? 3. Whether the lessor was entitled to an order to hand over possession of the property and payment of arrears of rent?
Ratio Decidendi: 1. The court held that the leasehold rights in favor of the company in liquidation did not come to an end by operation of law due to the winding up of the company. The court relied on the provisions of Section 108(j) of the Transfer of Property Act, 1882, which allows the lessee to transfer the leasehold property subject to the terms of the lease agreement. 2. The court held that the Official Liquidator had the power to sublet or otherwise part with possession of the property for the beneficial use of the winding up. The court relied on the provisions of Sections 456, 457, and 481 of the Companies Act, 1956, which vest the property of the company in liquidation in the Official Liquidator and empower the Official Liquidator to take all necessary steps for the beneficial winding up of the company. 3. The court held that the lessor was not entitled to an order to hand over possession of the property and payment of arrears of rent. The court held that the Official Liquidator was entitled to retain possession of the property and that the lessor's claim for arrears of rent could be adjudicated in the winding up proceedings.
Final Decision: The court rejected the lessor's application seeking an order to hand over possession of the property and payment of arrears of rent. The court also directed the Official Liquidator to pay the arrears of rent to the lessor and to obtain a fresh valuation report in respect of the leasehold rights in the land in question within three months.
1. In Company Application (L) No.634 of 2016, the applicant seeks an order and directions against the Official Liquidator to handover quiet, vacant and peaceful possession of the open land admeasuring 3743.21 sq.mtrs. bearing Survey No.194/1 (Part), situated at Village Majiwade, Taluka and District Thane and also seeks payment of Rs.19,800/- together with interest @ 18% per annum at the rate of Rs.19,800/- from the date of filing of this application till realization.
2. The Official Liquidator has filed a report bearing no. 610 of 2015 inter alia praying for a direction for reduction of reserve price of Rs.22 crores fixed by this court in respect of the property of the company in liquidation specified as lot no.3 viz. the leasehold open land admeasuring to 3743.21 sq.mtrs. situated at Survey No.194/1, Village Majiwade, Thane (West), District Thane – 400 606 or in the alternate seeks appropriate directions in this regard. By consent of parties, company application as well as Official Liquidator's Report were heard together and are being disposed of by a common order.
3. Some of the relevant facts for the purpose of deciding these proceedings are as under :-
It is the case of the applicant that by virtue of a lease agreement dated 1st July, 1968 for a period of 60 years, M/s. Devidayal Industries Limited (In liquidation) was granted lease in respect of the open land admeasuring 3743.21 sq.mtrs. bearing survey no.194/1 (Part) situated at Village Majiwada, Tal Salsette, Dist.Thane for a period of 60 years on payment of annual term and on the terms and conditions setout therein. As per the lease agreement, the lease period would expire on 1st July, 2028 i.e. approximately after 11 years.
4. By an order dated 21st November,2006 passed in Company Petition No.600 of 1997 with Company Petition No.345 of 2002, the respondent company i.e. M/s.Devidayas Industries Limited was directed to be wound up. Pursuant to the said order passed by this court, the Official Liquidator took possession of various assets of the company in liquidation including the said leasehold open land. The Official Liquidator invited claims and received seven claims. Some of the claims are rejected by the Official Liquidator.
5. Pursuant to the orders dated 19th December,2012 and 5th February, 2013 passed by this court, the Official Liquidator has sold three residential flats of the respondent company (in liquidation) situated at Thane and one flat situated at Chembur.
6. By an order dated 26th February, 2012 passed by this court on OLR's report dated 9th July, 2012, this court fixed reserved price of Rs.30 crores in respect of the property in question and permitted the Official Liquidator to sell the subject property along with other properties by way of public auction as per approved terms and conditions of sale and subject to the confirmation of this court. The Official Liquidator accordingly made attempts to sell the property in question by a public auction on 29th October, 2012 and 20th November, 2014. However, the sale could not be materialized in view of the fact that no offer was received by the Official Liquidator. The Official Liquidator accordingly submitted a report dated 11th February, 2014 for seeking directions to reduce reserved price of Rs.30 crores.
7. By an order dated 11th October, 2015 this court directed that the Official Liquidator shall advertise the sale of lot no.3 and to invite offers through public auction. The Official Liquidator accordingly published the sale notice in the two newspapers and also on the website of this court and Ministry of Corporate Affairs and of the Official Liquidator of this court. Pursuant to the said sale notice issued by the Official Liquidator, no offer was received in respect of the property in question. Since the Official Liquidator did not receive any offer inspite of various attempts made for the sale of the property in question, the Official Liquidator submitted a report dated 14th October, 2015 inter al
