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1999 Supreme(Cal) 545
IN THE HIGH COURT AT CALCUTTA
Altamas Kabir, J.
Re : Ashoka Steel Corporation Pvt. Ltd. (In Liquidation)
AND
Hariram Chamaria & Ors. – Appellants
Versus
The Official Liquidator, High Court at Calcutta – Respondent
Company Application No. 257 of 1993
Decided On : October 8, 1999
Advocate Appeared:
Mr. J. Saha and N. Sengupta for the Appellant
Mr. Ranajit Chowdhury for the Official Liquidator
Mr. M. Rajshekhar and M. Rajeswara Rao for the Vijaya Bank
A leasehold property can be disclaimed by the Official Liquidator under Section 535 of the Companies Act, 1956, if it is burdened with onerous covenants and the Company (in liquidation) has no reason to hold on to the property for the proper completion of the winding up process.
Headnote:
COMPANIES ACT, 1956 - SECTIONS 446, 535 - DISCLAIMER OF LEASEHOLD PROPERTY - LEASE EXPIRED - NO OPTION FOR RENEWAL EXERCISED - OFFICIAL LIQUIDATOR DIRECTED TO DISCLAIM PROPERTY AND MAKE OVER VACANT POSSESSION TO APPLICANTS.
Fact of the Case:
The applicants, co-owners of the premises No. 46, Grand Trunk Road, Liluah, filed an application under Sections 446 and 535 of the Companies Act, 1956, seeking a direction on the Official Liquidator to make over vacant possession of the portion of the premises allotted to them by a registered Deed of Partition or, alternatively, to disclaim the said property. The lease granted to the Company (in liquidation) had expired on 25th September, 1990, and the Company had defaulted in payment of rents to the tune of Rs. 1,82,800/- as on that date.
Finding of the Court:
The Court held that the Official Liquidator could have no reason to hold on to the property, the leasehold right whereof could no longer be said to be part of the assets of the Company (in liquidation). The Court distinguished the facts of this case from the facts before the Hon’ble Supreme Court in United Bank of India (supra), where the lease was for 99 years with an option of renewal for another 99 years and the lease rental was only Rs. 1,200/- per annum. In the instant case, both the original period of the lease as well as the period covered by the option of renewal had expired and the Company (in liquidation) continued to remain in possession of the land as a trespasser.
Issues: Whether the Official Liquidator should disclaim a property taken on lease where the terms of the lease provided for determination of the lease on the rents remaining unpaid or upon the Company being wound up.
Ratio Decidendi: The Court applied the ratio of the decisions in Sakow Industries Pvt. Ltd. (in liquidation) (supra) and Vidyadhar Upadhyay (supra) and held that the Official Liquidator can have no reason to remain in possession of the property in question for the proper completion of the winding up of the Company and his continued possession therein will, in fact, prove onerous to the said process.
Final Decision: The Court directed the Official Liquidator to take steps to sell the plant and machinery and to remove the same, together with the structures, on the portion of premises No. 46, Grand Trunk Road, Liluah, Howrah, described in Annexure “G” to the application, and to make over vacant possession thereof to the applicants within three months from the date of the order.
This application has been made under Section 446 and 535 of the Companies Act, 1956, by Hariram Chamaria and Others, for a direction on the Official Liquidator to make over vacant possession of the portion of premises No. 46, Grand Trunk Road, Liluah, which had been allotted to the applicants by a registered Deed of Partition dated 25th October, 1996, or, in the alternative for a direction on the Official Liquidator to disclaim the said property.
2. On behalf of the applicants Mr. Saha submitted that one Kishan Devi Chamaria, Shew Prasad Chamaria and Hariram Chamaria were the owners of the land measuring 2 bighas 3 cottahs and 8 chittacks, together with the structures thereon, at premises No. 46, Grand Trunk Road, Liluah. By an indenture dated 26th September, 1960, Kishan Devi Chamaria, Shew Prasad Chamaria and Hariram Chamaria demised the said premises in favour of General Produce Co. Ltd. for a period of thirty years with an option to renew the same for a further period of five years.
3. Shew Prasad Chamaria expired on 11th January 1972, and his eldest son, Umashankar Chamaria became karta of a Hindu Undivided Family consisting of himself and his other bothers and as such karta he became entitled to the share of Shew Prasad Chamaria in the said premises.
4. General Produce Co. Ltd. granted sub-leases of different portions of the said premises to three different parties, namely, (1) Anil Kumar Sareen, Proprietor of M/s J.R. Forging & Allied to the extent of 1 bigha 2 cottahs 4 chittacks and 42 square feet and (3) Vijaypal Gambhir, Proprietor, M/s. S.K. Steel & Engineering Co. to the extent of 11 cottahs, 11 chittacks and 5 square feet.
5. Subsequently, by three Deeds of Assignment, all dated 29th October, 1973, the sub lessees assigned their sub-leases in favour of Ashoka Steel Corporation Pvt. Ltd. (in liquidation).
6. In 1975 a winding up petition, being Company Petition No. 343 of 1975, was filed by Kishan Devi Chamaria. Umashankar Chamaria and Hariram Chamaria against General Produce Co. Ltd. and the same was dispose of by a Terms of Settlement dated 21st January, 1976, whereby the said General Produce Co. Ltd. surrendered its leasehold interest in the demised premises and M/s. Ashoka Steel, Corporation Pvt. Ltd. became the direct lessee under the them owners in respect of 2 bighas 11 cottahs 11 chittaks and 6 squares feet forming part of premises No. 46 Grand Trunk Road, Liuah.
7. Kishan Devi Chamaria expired on 22nd February, 1981 and on 25th October 1996, by a Deed of Partition executed and registered between the co-owners the applicants in the application became the owners of the premises.
8. The lease granted initially in favour of M/s General Produce Co. Ltd. and, thereafter to M/s Ashoka Steel Corporation Pvt. Ltd. came to an end on 25th September, 1990 and no request was made by the lease for renewal of the same. The lessee had also defaulted in payments of the rents to the tune of Rs. 1,82,800/- as on 25th September, 1990.
9. Mr. Saha submitted that M/s. Ashoka Steel Corporation Pvt. Ltd. became sick and a reference was made to the Board for Industrial and Financial Reconstruction, being Case No. 28/91 under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, in the regard on the said Board came to the conclusion that the company should be wound up. On the basis of the recommendation of the Board for Industrial & Financial Reconstruction, this Court by an order dated 23rd November, 1992, directed the Company to be wound up.
10. Mr. Saha submitted that the Company (in liquidation) is wrongfully and illegally occupying the premises, and all the aforesaid facts have been brought to the knowledge of the Official Liquidator who is liable to make over vacant possession of the premises to the applicants. The Company (in liquidation) has no right over the said premises and the Official Liquidator is also not entitled to hold on to possession of the same.
11. In support of his submission Mr. Saha fir
