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2007 Supreme(Cal) 754
S. S. NIJJAR, C. J. AND TAPEN SEN, J.
Hongkong and Shanghai Banking Corporation Ltd.
versus
Official Liquidator.
A.C.O. No. 164 of 2007
Decided on : 26 -9 -2007
Anindya Mitra, Sr. Advocate, Abhrajit Mitra, Dwipraj Bose, for Appellant; M.C. Ghose, Ms. Mithua Sen, for Official Liquidator; Pratap Chatterjee, Sr.. Advocate, D. Basak, Amitesh Banerjee, Deep Roy Chowdhury, for Intervenor.
A company in liquidation can disclaim a leasehold property under Section 535 of the Companies Act, 1956, if the property is burdened with onerous covenants or is not readily saleable, and if it is not required for the beneficial winding up of the company.
Headnote:
DISCLAIMER - TENANCY - DISCLAIMER OF LEASEHOLD - COMPANY IN LIQUIDATION - COMPANY (IN LIQUIDATION) CANNOT BE PERMITTED TO TAKE ADVANTAGE OF ITS OWN WRONG - DEFAULT BY COMPANY (IN LIQUIDATION) - COMPANY (IN LIQUIDATION) BECOMES RANK TRESPASSER - PREMISES NOT REQUIRED BY LIQUIDATOR FOR WINDING UP - SEVERANCE OF LANDLORD AND TENANT RELATIONSHIP - NO ONEROUS COVENANT - DISCLAIMER APPLICATION MAINTAINABLE - SECTIONS 457, 535 COMPANIES ACT, 1956.
Fact of the Case:
The appellant, the owner of the premises, had filed an eviction suit against the Company (in liquidation), which was dismissed for default. The appellant again served a notice terminating the tenancy and requiring the Company to give up vacant possession of the premises. The Company failed to comply with the notice, and the appellant filed a civil suit for eviction, mesne profits, and other reliefs. The suit was decreed in favor of the appellant, and the Company filed an appeal. The Appeal Court passed a conditional stay order directing the Company to pay a certain amount per month until the appeal was heard and disposed of. The Company defaulted in making payment, and the decree became executable. The Company filed a petition seeking winding up, and the Company Court passed the winding-up order. The appellant came to know about the winding-up order and served a notice on the Official Liquidator, pointing out the default and demanding payment of the amounts due. The Official Liquidator did not make any payment or hand over vacant possession. The appellant filed an application under Section 535 read with Section 458 of the Companies Act, 1956, seeking a direction to the Official Liquidator to disclaim the premises.
Finding of the Court:
The Court held that the premises in question were no longer required by the Company (in liquidation) or the Official Liquidator. The Company (in liquidation) could not be permitted to take advantage of its own wrong by defaulting on the payment and becoming a rank trespasser. The continued possession by the Official Liquidator of the premises would prove onerous to the winding-up process, as the Company (in liquidation) would be required to pay a huge amount of occupation charges under the orders of the Appellate Court. The Court further held that the disclaimer application was maintainable under Section 535 of the Companies Act, 1956, as the premises were burdened with the performance of an onerous act, namely, the payment of occupation charges.
Issues: 1. Whether the premises in question were required by the Company (in liquidation) or the Official Liquidator. 2. Whether the Company (in liquidation) could be permitted to take advantage of its own wrong by defaulting on the payment and becoming a rank trespasser. 3. Whether the continued possession by the Official Liquidator of the premises would prove onerous to the winding-up process. 4. Whether the disclaimer application was maintainable under Section 535 of the Companies Act, 1956.
Ratio Decidendi: 1. The Court held that the premises in question were no longer required by the Company (in liquidation) or the Official Liquidator, as the Company had ceased to carry on business and the premises were not necessary for the beneficial winding up of the Company. 2. The Court held that the Company (in liquidation) could not be permitted to take advantage of its own wrong by defaulting on the payment and becoming a rank trespasser, as it would be unjust to allow the Company to retain possession of the premises without making any payment. 3. The Court held that the continued possession by the Official Liquidator of the premises would prove onerous to the winding-up process, as the Company (in liquidation) would be required to pay a huge amount of occupation charges under the orders of the Appellate Court, which the Company would be unable to pay. 4. The Court held that the disclaimer application was maintainable under Section 535 of the Companies Act, 1956, as the premises were burdened with the performance of an onerous act, namely, the payment of occupation charges.
Final Decision: The Court allowed the appeal, set aside the judgment of the learned single Judge, and issued a direction to the Official Liquidator to disclaim the premises in question and make over possession to the appellant.
S. S. NIJJAR, C. J. :- This appeal has been filed challenging the order of the Trial Court dated 7th August, 2007 in C.A. No. 366 of 2006 in C.P. No. 162 OF 2003, Buxa Dooars Tea Company (India) v. Hongkong and Shanghai Banking Corporation Limited.
2. The case of the petitioner/appellant is that it is the owner of premises No. 31 B.B. Bagh (South), Kolkata-700001. One Buxa Dooars Tea Company (India) Limited in liquidation (hereinafter referred to as the Company (in liquidation) Since about 978 was a tenant under The Petitioner in respect of an air-conditioned office area measuring about 7,031 sq.ft. on the second floor of the premises owned by the appellant. The Company (in liquidation) stopped paying rent to the petitioner in or about 1990. Therefore, an eviction suit had been filed against the Company (in liquidation) in the year 1990. The suit was, however, dismissed for default. Thereafter, the appellant, as the owner of the premises, again served a notice dated 12th January, 2004 on the Company |(in liquidation), inter alia, terminating their tenancy in respect of the premises under Section 106 of the Transfer of Property Act, requiring the Company (in liquidation) to give up vacant and peaceful possession of the premises to the appellant. The Company failed to comply with the notice. Therefore, the appellant again filed a civil suit being C.S. No. 1 of 2005 in this Court seeking a decree for eviction of the Company (in liquidation) from the said premises, mesne profits and other reliefs. The suit was decreed in terms of prayer 'A' of the Master Summons taken out on behalf of the appellant (plaintiff) dated 10th March, 2005. The Company (in liquidation) filed an appeal from the aforesaid order and decree dated 13th September, 2005. The Appeal Court passed a conditional stay order dated 20th December, 2005 directing the Company (in liquidation) to pay at the rate of Rs. 20 per sq. ft. for an area of 7013 sq.ft. per month until the appeal was heard and disposed of. The payment was directed to be made from the date of the decree, i.e. October 2005. It was also directed that in default of payment of the amount, the stay granted will be automatically vacated. In terms of the aforesaid order, the Company (in liquidation) paid the initial aggregate amount of Rs. 5,62,480/- on 14th January, 2006 being the rent for the month of October, 2005 to January, 2006 at the rate of Rs. 1,40,620/- and a further monthly payment of Rs. 1,40,620/- on 15th February, 2006. Thereafter, the Company (in liquidation) defaulted in making payment in terms of the conditional stay order and the decree dated 13th September became executable. The fact of such default is recorded in the letter of the Advocate-on-Record of the appellant dated 3rd April, 2006. By order dated 17th August, 2007 the appeal itself was dismissed. It appears that the Company Petition No. 162 of 2003 was filed seeking winding up of the Company (in liquidation). By order dated 1st March, 2006 the Company Court passed the winding up order and the official Liquidator was directed to forthwith take possession of the assets of the Company. The appellant came to know about the winding up order on 8th May, 2006. Till then the decree dated 13 September, 2005 had not been executed. The appellant, therefore, served a notice dated 10th May, 2006 on the Official Liquidator pointing out that on default having been committed by the Company (in liquidation) in making payment as directed by the Appeal Court on 20th December, 2005, from the month of March, 2006 the stay order passed by the Appeal Court stood automatically vacated. The appellant, therefore, put the Official Liquidator on notice that it had no right to remain in possession of the premises without making payment in terms of the order of the Appeal Court dated 20th December, 2005. It was also stated that the occupation charges for the month of March 2006 and April 2006 at the rate of Rs. 1,40,620/- per month have already fallen
