Bombay High Court
The Official Liquidator High Court ... vs Transpower Engineering Ltd on 26 July, 2018
Author: K.R. Shriram
Bench: K.R.Shriram
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
OFFICIAL LIQUIDATOR NO.466 OF 2016
IN
COMPANY PETITION NO.606 OF 1998
In the matter of Companies Act, I of
1956;
And
In the matter of M/s. Transpower
Engineering Ltd. (In Liquidation)
M/s. Metal Tubes and Rolling Mills ....Petitioner
----
Shri Sharan Jagtiani for Official Liquidator.
Shri Prashant Chawan a/w. Shri Navdeep Vora I/b. Navdeep Vora and
Associates for MIDC.
Shri Rohit Gupta a/w. Shri Vinod Kothari and Ms. Gauri Joshi I/b. Apex Law
partners for purchaser.
Shri Mahendhar Aithe, Company Prosecutor for Official Liquidator present.
----
CORAM : K.R.SHRIRAM, J.
RESERVED ON : 5th JULY 2018
PRONOUNCED ON : 26th JULY 2018
JUDGMENT :
1 Official Liquidator has placed this Official Liquidator's Report for the following reliefs :
(a) Whether this Hon'ble Court may be pleased to condone the delay in filing the present report for charges that may become payable to MIDC pursuant to the order dated 14th January 2016;
(b) Whether this Hon'ble Court may be pleased to direct MIDC to disclose basis for claim of Transfer Charges, Differential Premium or Extension Charges for transfer of the said plot;
(b) (1) Whether in view of para 34A of the report, this Hon'ble Court be pleased to hold and declare that the sale or liquidation of the subject property in the course of winding up of the allottee/lessee is a formal transfer under Gauri Gaekwad 2/40 906.OLR-466-2016-1.doc the extant MIDC Circulars and therefore not subject to payment of "Differential premium";
(b) (2) Whether in view of para 42A of the report, this Hon'ble Court be pleased to exercise powers under Section 446 (2) of the Companies Act, 1956 read with MIDC Circular dated 11th June 2011 and waive the levy of "Extension Charges" as claimed by MIDC over the subject property;
(c) Whether this Hon'ble Court be pleased to direct MIDC to file its claim with regard to the charges that would become payable upon the said property being transferred so as to enable the Official Liquidator to take steps for revaluation and sale in compliance of the Hon'ble High Court order dated 1st July 2016.
2 Official Liquidator was appointed pursuant to an order dated 22nd January 2008 as Liquidator of Transpower Engineering Limited [the company (in liquidation)]. The subject matter of this Official Liquidator's Report are two plots bearing no.A-26/3 admeasuring 64,569.50 sq. mts. and plot bearing no.A/26/2/2 admeasuring 22,879 sq. mts. situated at Butibori Industrial Area, Nagpur (the said plots). In this judgment, we are also considering the transfer policy of MIDC in respect of transfer of plots. MIDC was not originally a party to this petition or Official Liquidator's Report but since reliefs were being sought against MIDC, MIDC was directed to file an affidavit giving the details of its policy and various charges that it levies, should it wish to oppose the OLR.
3 MIDC had alloted plot bearing no.A-26/3 on 24 th November 1994 to the company (in liquidation). On 11th January 1995, MIDC executed Gauri Gaekwad 3/40 906.OLR-466-2016-1.doc an Agreement to Lease with the company (in liquidation). Under the terms of the Agreement to Lease, the allottee, viz., the company (in liquidation), was required to build and completely finish the building and structure to be used for industrial factory within 36 months, i.e., by 10 th January 1998. On 20th June 1995, MIDC alloted another plot bearing no.A/26/2/2 to the company (in liquidation). On 16th April 1996, MIDC executed a pre- determined Lease Agreement in respect of the said plots which provided that the lessee shall, on or before 22nd May 1998, complete the building and other structures. Pre-determined Lease Agreements are entered into when the lessee wants to take financial assistance and give the leasehold rights in the plot as security.
4 On 22nd January 2008, this Court ordered Transpower Engineering Limited be wound up. Subsequently, on or about 16 th May 2008 after the company was ordered to be wound up and as the company had not constructed a factory building on the said plots, MIDC called upon the company (not Official Liquidator, who had by then taken possession) to submit the building completion certificate on or before 31st December 2008. 5 On 12th June 2010, MIDC called upon the company (again not Official Liquidator) to show cause as to why action should not be taken against them for failure to complete construction of the factory building and submit the building completion certificate within the stipulated time. On Gauri Gaekwad 4/40 906.OLR-466-2016-1.doc 11th April 2011, MIDC issued a panchanama notice in which it was mentioned that the effective date of termination was 29 th April 2011. On 31st August 2011, MIDC issued another letter to the company and again not to Official Liquidator, calling upon it to file a reply to the show cause notice that it had issued on 12th June 2010. In the meanwhile, on or about 17th February 2011, Official Liquidator had already taken possession of the said plots.
6 On 21st September 2011, MIDC cancelled the allotment of the said plots as the company had not filed a reply to the show cause notice and called upon the company to return the documents of the said plots. Again this was addressed to the company and not to Official Liquidator even though more than three years had passed after the company was ordered to be wound up and after Official Liquidator took possession. This position is not disputed by MIDC. Even after MIDC had express knowledge of the order of winding up and the appointment of the Official Liquidator, it took no steps vis-à-vis the Official Liquidator.
7 On 23rd January 2012, Official Liquidator, pursuant to order dated 13th January 2012 passed in company application no.583 of 2011 filed by the workers of the company (in liquidation), invited claims from the workers/creditors under Rule 148 of the Companies (Court) Rules, 1959. The last date for filing the claims was 10th February 2012. Official Liquidator Gauri Gaekwad 5/40 906.OLR-466-2016-1.doc received 285 claims. On 24th January 2013, the reserve price for the said plots was fixed at Rs.8,00,00,000/-. All this while MIDC was not in the picture at all. Despite public notice and the fact that Official Liquidator had taken possession of the said plots, MIDC did not even come forward to lodge its claim or any protest with Official Liquidator. Bids were received and the offer of one Gold Chip Infraventure Private Limited (Gold Chip) for Rs.8,50,00,000/- was accepted by this Court. Gold Chip paid the entire consideration and on or about 18th October 2013 possession of the property was given to Gold Chip. Due to various reasons, which we need not go into at this stage, the formalities for transfer of title to Gold Chip could not be completed and therefore, Gold Chip took out a company application praying for conveyance and possession of the said plots or in the alternative, for refund of the purchase price. The said company application being company application no.461 of 2013 came to be disposed and Official Liquidator offered to transfer the said plots to Gold Chip and also to pay all MIDC charges as may be determined by the Court. In the meanwhile, Official Liquidator had received the quantum of charges from MIDC which he was challenging. The Company Court had directed Official Liquidator to take out an application, if he so desired, seeking reliefs pertaining to the demand of MIDC charges.
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8 Official Liquidator, thereafter presented Official Liquidator's
Report No.185 of 2015 seeking, inter alia, appropriate orders concerning payment of MIDC charges including a suitable waiver or reduction of those charges. In reply to Official Liquidator's Report, MIDC took a position that the company (in liquidation) had failed to complete the factory building within the stipulated period as per the Lease Agreement and as a result, MIDC had an option either to determine the lease or continue the demise on payment of additional charges to MIDC, MIDC had vide its letter dated 21st September 2011 cancelled the allotment and Agreement of Lease of the said plots and hence the property could not be transferred by Official Liquidator to any third party. MIDC, however, was agreeable for such transfer, if Official Liquidator pays the outstanding amount of its service and other charges, extension charges and differential premium, all aggregating in excess of Rs.8,40,00,000/-. MIDC had also raised objection to the jurisdiction of this Court to order any waiver or modification of these charges. I must add this is the stand taken by MIDC even today. 9 In view of the stand of MIDC, Gold Chip took out an application bearing lodging no.544 of 2015 and sought refund of the amount of Rs.8,50,00,000/- paid to Official Liquidator and also claimed damages. The Court allowed refund of the amount together with interest thereon at 9% p.a. But, there was a problem. The problem was, Official Liquidator had, Gauri Gaekwad 7/40 906.OLR-466-2016-1.doc in the meanwhile, utilised part of this amount of Rs.8,50,00,000/- to pay some of the workers' dues, which I am informed, was in the region of about Rs.1,50,00,000/-.
10 As MIDC had filed a reply dated 24 th June 2014 in company application no.358 of 2013, this Court in its order dated 1 st July 2016 in Official Liquidator's Report No.67 of 2016, had directed Official Liquidator to file a report to this Court in respect of the charges payable to MIDC for any transfer of the said plots in favour of third party. Pursuant thereto, Official Liquidator by a letter dated 9 th March 2015 to MIDC, called upon MIDC to lodge their claim with Official Liquidator and MIDC despite reminders, did not reply. In the meanwhile, on or about 17 th February 2016, Official Liquidator released a sum of Rs.7,71,00,000/- to Gold Chip. The balance of the principal and interest is yet to be paid to Gold Chip. The possession of the said plots is with Official Liquidator. 11 The Court had directed Official Liquidator to appoint a Valuer for valuation of the said plots. As the status on the MIDC's dues, which it had claimed primarily towards differential premium and extension charges was not crystalised, the valuation would have made no sense. As noted earlier, the said plots were sold for Rs.8,50,00,000/- whereas MIDC's claim was in excess of Rs.8,40,00,000/- and that would have left no money with Official Liquidator to pay all other dues.
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It is in this background, the present Official Liquidator's Report has been taken for the reliefs as quoted earlier.
12 MIDC has filed affidavit in reply contending that (a) this Court has no jurisdiction to decide on the charges claimed by MIDC;
(b) differential premium is payable; and (c) extension charges is also payable but a Competent Court will have the power to direct waiver of those charges and this Court is not a Competent Court. MIDC has claimed the following charges :
Charge Plot No.A-26/3 Plot No.A-26/2/2 Differential Premium Rs.2,54,40,200/- Rs.88,20,400/- Extension Charges Rs.2,48,43,200/- Rs.88,02,700/- Service and other Rs.39,84,611/- Rs.94,08,455/- Charges Total Rs.5,42,58,011/- Rs.1,90,31,555/- Note :
As per the Affidavit dated 17th February 2017 filed by MIDC, this figure is Rs.11,53,11,449/-
The breakup for the same is as follows :
Charge Plot No.A-26/3 Plot No.A-26/2/2
Differential Premium Rs.3,15,25,900/- Rs.1,11,70,700/-
Extension Charges Rs.4,77,44,734/- Rs.1,68,53,999/-
Service and other Rs.59,18,736/- Rs.20,97,380/-
Charges
Total Rs.8,51,89,370/- Rs.3,01,22,079/-
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13 Shri Chawan, counsel for MIDC submitted that this is only
indicative and actual amount payable will be determined only on the date when the transfer application is received. Shri Jagtiani submitted that the issue today is not the quantum but whether any charge is payable. I agree with Shri Jagtiani.
JURISDICTION :
14 It is MIDC's case that (a) MIDC is a statutory corporation established under MID Act 1961; (b) MID Act is complete code dealing with powers, duties, obligations of MIDC and as well as acquisition and disposal of land and other aspects relating to the allotment of plots by MIDC;
(c) various circulars, where the policy towards transfer charge, differential charges, extension charges, etc., have been issued in exercise of statutory powers by MIDC; (d) only after the application for transfer of plots is made by the allottee to MIDC in the prescribed format alongwith necessary documents as required by MIDC, a separate order for payment of the charges towards transfer charges and extension charges, service charges, as applicable will be issued and such an order would not be amenable to modification or challenge before the Company Court exercising powers under the Companies Act 1956; (e) since such an order is yet to be passed, the application of Official Liquidator is premature because the amounts are yet to be determined and (f) since Official Liquidator is seeking a Gauri Gaekwad 10/40 906.OLR-466-2016-1.doc declaration as stated in prayer clause b(1) and b(2) reproduced above, that can be decided only by a Civil Court or challenged after an order is passed on a transfer application in a Writ Court under Article 226 of the Constitution of India.
15 Per contra, Shri Jagtiani, counsel for Official Liquidator submitted that a question of law has arisen in the matter relating to and arising in course of the winding up of the company namely, whether the sale/transfer of the leasehold rights in the subject property during the course of winding up falls within the category of formal transfer or non- formal transfer. Such question or determination has a direct bearing on the sale or the potential to sell the leasehold rights and utilize the sale proceeds to discharge claims made in liquidation. This issue squarely forms part of a matter relating to the process of winding up (which entails the sale of assets) of the company in liquidation and the Company Court, under the provisions of Section 446 (2) read with Section 456 and Section 457 of the Companies Act, 1956 has ample powers to decide on this subject matter as well.
16 It would be useful to reproduce, before we proceed further, Section 446 (2), Section 456 (1) and (2) and Section 457 (1) (c) which read as under :
446. Suits stayed on winding up order -
Gauri Gaekwad 11/40 906.OLR-466-2016-1.doc (1) ...................
(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being, in force, have jurisdiction to entertain, or dispose of-
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company (including claims by or against any of its branches in India);
(c) any application made under section 391 by or in respect of the company;
(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company;
whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.
...........
456. Custody of company' s property.
(1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled.
(1A) ...........
(1B) ..........
(2) All the property and effects of the company shall be deemed to be in the custody of the court as from the date of the order for the winding up of the company.
457. Powers of liquidator.
(1) The liquidator in a winding up by the Court shall have power, with the sanction of the Court,-
(a) ..........
(b) ..........
(c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels;
...........
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17 Shri Jagtiani relied upon judgment in the matter of (i) Sisters
of St. Joseph of Cluny V/s. The State of West Bengal and Ors. 1, (ii) Maharashtra Industrial Development Corporation and Ors. V/s. Mahendra G. Wadhwani2 and (iii) Ajay Y. Mafatlal V/s. M/s. Mafatlal Dyes Chemicals Limited3 in support of his submissions that this Court has jurisdiction.
18 Section 446 gives very wide powers to the Company Court. Section 446 (2) (d) was introduced pursuant to an amendment, which came into effect from 28th December 1960. The Apex Court in the matter of Sudarsan Chits (I) Limited V/s. O. Sukumaran Pillai 4 has analysed this provision extensively. Paragraphs 7, 8, 9 and 13 of the said judgment read as under :
"7. Sec. 446(2) reads as under:
446(2): The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of-
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company (including claims by or against any of its branches in India);
(c) any application made under Section 391 by or in respect of the company;
(d) any question of priorities or any other question whatsoever, whether of lay or fact, which may relate to or arise in course of the winding up of the company;
whether such suit or proceeding has been instituted or is instituted, or such claim or question had arisen or arises or such application has been
1. 2018 SCC Online SC 397
2. MANU/MH/0086/1995
3. 2015 SCC Online Bom 7696
4. 1984 (4) SCC 657 Gauri Gaekwad 13/40 906.OLR-466-2016-1.doc made or is made before or after the order for the winding up of the company, or before or after the commencement, of the Companies (Amendment) Act, 1960."
8. Before we advert to the question of construction of Sec. 446(2)(b), it would be advantageous to notice the historical evolution of the provision as well as its present setting. Sec. 171 of the Indian Companies Act, 1913, the predecessor of Sec. 446(1) did 517 not contain any provision similar or identical to that of Sec. 446(2). Sec. 171 only provided for stay of suits and proceedings pending at the commencement of winding up proceeding, and embargo against the commencement of any suit or other legal proceedings against the company except by the leave of the court. This provision with little modification is re-enacted in Sec. 446(1). There was no specific provision conferring jurisdiction on the court winding up the company analogous to the one, conferred by Sec. 446(2). Sub-sec. (2) was introduced to enlarge the jurisdiction of the court winding up the company so as to facilitate the disposal of winding up proceedings. The provision so enacted probably did not meet with the requirement with the result that the Committee appointed for examining comprehensive amendment to the Companies Act in its report recommended that 'a suit' by or against a company in winding up should notwithstanding any provision in law for the time being be instituted in the court in which the winding up proceedings are pending. (1) 'To give effect to these recommendations, sub-sec. (2) was suitably amended to bring it to its present from by Companies (Amendment) Act, 1960. The Committee noticed that on a winding up order being made and the Official Liquidator being appointed a Liquidator of the company, he has to take into his custody company property as required by Sec. 456. Sec. 457 confers power on him to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company. Power is conferred upon him to sell the properties both movable and removable of the company and to realise the assets of the company and this was to be done for the purpose of distributing the assets of the company amongst the claimants. Now at a stage when a winding up order is made the company may as well have subsisting claims and to realise these claims the Liquidator will have to file suits. To avoid this eventuality and to keep all incidental proceedings in winding up before the court which is winding up the company, its jurisdiction was enlarged to entertain petition amongst others for recovering the claims of the company. In the absence of a provision like Sec. 446(2) under the repealed Indian Companies Act, 1913, the official Liquidator in order to realise and recover the claims and subsisting debts owed to the company had the unenviable fate of filing suits. These suits as is not unknown, dragged on through the trial court and Courts of appeal resulting not only in multiplicity of proceedings but would hold up the progress of the winding up proceedings. To 518 save the company which is ordered to be wound up from this prolix and expensive litigation and to accelerate the disposal of winding up proceedings, the parliament devised a cheap and summary remedy by conferring jurisdiction on the court winding up the company to entertain petitions in respect of claims Gauri Gaekwad 14/40 906.OLR-466-2016-1.doc for and against the company. This was the object behind enacting Sec. 446(2) and therefor, it must receive such construction at the hands of the court as would advance the object and at any rate not thwart it.
9. The fasciculus of sections included in Part VII of the Companies Act bears the heading 'Winding up'. Sec. 443 sets out the circumstances in which a company may be wound up by the court. Sec. 444 provides that where the court makes an order for the winding up of a company, the Court shall forthwith cause intimation thereof to be sent to the official Liquidator and the Registrar. Sec. 446(1) provides that when a winding up order has been made or the official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the court may impose. Then comes sub-sec. (2) of Sec. 446. It specifies the contours of the jurisdiction of the court which is winding up the company. It confers special jurisdiction on the Court which is winding up the company to do things that are set out in the various sub-clauses notwithstanding anything contained in any other law for the time being in force. Sec. 446(2) thus conferred special jurisdiction on the court winding up the company which otherwise it may not have enjoyed. The court in the Companies Act is defined in Sec. 2(11) to mean with respect to any matter relating to a company (other then any offence against this Act), the Court having jurisdiction under the Act with respect to that matter relating to that company, as provided in Section
10. Section 10 provides that the court having jurisdiction under the Act shall be the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-sec. (2). The winding up petition has thus to be presented in the High Court before the Judge who is assigned the work under the Companies Act. Therefore, the Court which is winding up the Company will be the court to whom the petition for winding up was presented and which passed the order for winding up the Company. In this case, the order was made by the learned Company Judge in the Kerala High Court directing winding up the company. An appeal lies against the order for winding up the Company under section 483 to the same court to which and in the same manner in which and subject to the same conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction. In exercise of this Appellate jurisdiction, the Appellate Bench entertained the appeals and directed that the winding up order shall be held in abeyance till the scheme is implemented and if any default is committed the winding up order made by the learned Company Judge would be revived.
10. ........
11. ........
12. ........
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13. The approach of the High Court, with respect, overlooks the object and purpose sought to be achieved by introducing sub-sec. (2) in Sec. 446 by Amending Act 65 of 1960. As noted earlier, winding up proceedings dragged on far decades with no end in sight and with no benefit to the creditors and contributories of the Company. To accelerate the process of winding up so as to bring them to an end, this sub-section was amended in its present form in 1960 conferring jurisdiction on the court winding up the company to entertain amongst others any suit or proceeding by or against the company or any claim made by or against the company. If therefore, a winding up petition is pending meaning thereby that an official Liquidator is appointed as provisional Liquidator which is a stage in the process of winding up, the court before which such proceeding is pending can be styled as a court winding up of the company and ipso facto it would have jurisdiction to entertain the proceeding enumerated in clauses (a) to (d) of sub-sec. (2) of Sec. 446. The apprehension of the High Court that if such jurisdiction is conferred on the court at a stage anterior to the winding up order being made but subsequent to the appointment of official Liquidator as provisional Liquidator an anomalous situation would arisen has left us unimpressed. If the winding up petition fails the proceedings pending in the court may have to be transferred to the court which can entertain the proceeding. But if the petition praying for winding up the company ends in a winding up order the proceedings initiated under sub-sec. (2) will have to be proceeded with till they are finally disposed of because winding up order will relate back to the date of the presentation of the winding up petition. In this view of the matter no anomalous situation can ever arise."
This Court in Ajay Y. Mafatlal (Supra) considered the decision of the Hon'ble Supreme Court passed in Sudarsan Chits (I) Ltd. (Supra) and held that Section 446 of the Act gives very wide powers to the company court. This Court held that Section 446(2) of the Act conferred wide jurisdiction on the court winding up the company to entertain, amongst others, any suit or proceeding by or against the company or any claim made by or against the company or any other question whatsoever which may relate to or arise in course of the winding up of the company.
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19 Therefore, as the winding up proceedings used to drag on for
decades with no end in sight and with no benefit to the creditors and contributories of the company, to accelerate the process of winding up so as to bring them to an end, this sub-section was amended in its present form in 1960 conferring jurisdiction on the court winding up the company to entertain amongst others any suit or proceeding by or against the company or any claim made by or against the company or any other question whatsoever which may relate to or arise in course of the winding up of the company. In the absence of a provision like Section 446(2), Official Liquidator in order to realise and recover the claims and subsisting debts owed to the company would have to otherwise file suit in various forums. These suits may drag on through the trial courts and then the appeal court resulting not only in multiplicity of proceedings but also holding up the progress of the winding up proceedings. The Liquidator will have to also incur expensive litigation cost. This was the object behind enacting Section 446(2) and therefore, it must receive such construction at the hands of the court as would advance the object and not thwart it. This court is the court as defined in the Companies Act.
20 Section 446 (2) starts with a non-obstante clause and it says "Notwithstanding anything contained in any other law for the time being in force .........." and under sub-section (d) it says "any question of priorities or Gauri Gaekwad 17/40 906.OLR-466-2016-1.doc any other question whatsoever, whether of law or fact, which may relate to or rise in course of the winding up of the company", whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company. The powers under Section 446 bestowed to this Court are so wide that the Court has power "to decide any other question whatsoever", "whether of law or fact", "which may relate to or rise in course of the winding up of the company". The expression "any other question whatsoever" as well as the expression "which may relate to or rise in the course of the winding up of the company", are words of wide import, clothe the Company Court with the power to decide any question whatsoever that may arise whether of law or fact, which may relate to or rise in course of the winding up of the company. The power as given under Section 446 (2) (d) therefore, could include the power to grant a declaration as prayed for in this Official Liquidator's Report. Whether such declaration as prayed for should be granted is dealt with separately. 21 The Apex Court in Sisters of St. Joseph of Cluny (Supra) while considering the provisions of Section 11 of the National Commission for Minority Education Institutions Act 2004 (NCMEIA) held that the expression "all questions" as well as the expression "relate to" are words of wide import. Though the facts are totally different, in Section 446 (2) (d), the Gauri Gaekwad 18/40 906.OLR-466-2016-1.doc words "any other question whatsoever" and "which may relate to or rise in course of the winding up of the company" have been used. When one draws a parallel between Section 11 of NCMEIA and Section 446 (2) (d) of the Companies Act, 1956, it would show that the provisions of Section 446 (2)
(d) are of much wider import than the provisions used in Section 11 (f) of NCMEIA. Paragraph 14 and 19 of Sisters of St. Joseph of Cluny (Supra) read as under :
14. Section 11 has been amended since the enactment of the 2004 Act as follows:
...................
Functions of Commission.- Notwithstanding anything contained in any other law for the time being in force, the Commission shall- .................
(f) decide all questions relating to the status of any institution as a Minority Educational Institution and declare its status as such;
...............
19. Secondly, Section 11(f) is a very wide provision which empowers the NCMEI to decide all questions relating to the status of an institution as a minority educational institution and to declare its status as such. The expression "all questions" as well as the expression "relating to", which are words of wide import, clothe the NCMEI with the power to decide any question that may arise, which may relate directly or indirectly, with respect to the status of an institution as a minority education institution. Looked at by itself, Section 11(f) would include the declaration of the status of an institution as a minority educational institution at all stages. Article 30 of the Constitution of India grants a fundamental right to all minorities, whether based on religion or language, to establish and administer educational institutions of their choice. The power under Section 11(f), read by itself, would clothe the NCMEI with the power to decide any question that may arise with regard to the right to establish and/or administer educational institutions by a minority. The power does not stop there. It also includes the power to declare such institution as a minority educational institution, which is established and administered as such, so that it can avail of the fundamental right guaranteed under Article 30 of the Constitution.
(emphasis supplied)
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22 Moreover, sub-section (1) of Section 456 provides "where a
winding up order has been made or where a provisional liquidator has been appointed, the official liquidator or provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, to which the company is or appears to be entitled". It provides therefore, not only where parties agree the company is entitled to a property but even in cases where to the Liquidator it "appears" that the company is entitled to a property. The power is vast. The leasehold rights of the Company are an asset of the Company which is capable of sale through the process of liquidation. Therefore, Official Liquidator has powers to take possession of even MIDC property given on lease and sell the subsisting leasehold rights during the course of winding up. As provided under Section 457 (1) (c), Official Liquidator in a winding up by the Court shall have power, with the sanction of the Court, to sell the immovable property of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels. 23 This Court in MIDC V/s. Mahendar Wadhwani (Supra) held that Liquidator, in a winding up by the Court, had power to sell and transfer, inter alia, leasehold rights of the company under liquidation for the unexpired period of lease and the Company Court has the jurisdiction and the powers to issue all necessary, ancillary and incidental Gauri Gaekwad 20/40 906.OLR-466-2016-1.doc directions so as to effectuate the main power contained in Section 457 (1)
(c) of the Companies Act 1 of 1956, read with other enabling provisions of the Act. The Court held that the Company Court has jurisdiction to issue necessary directions to one and all in respect of matters interlinked with the disposal of the property of the company under liquidation by the Official Liquidator with the sanction of the Court. The Court did not consider the provisions of Section 446 (2) and it appears that it was not argued. The facts in MIDC V/s. Mahendar Wadhwani (Supra) though were not very similar it still has relevance to this matter. In that case, one Gannon Dunkerley and Co. Ltd. had offered to purchase all the assets of the company in liquidation alongwith the leasehold interest of the company under liquidation in respect to certain MIDC plots. MIDC was pleased to grant its consent for transfer of the lessee's interest in those plots without charging any amount of additional premium. The leasehold interest was not transferred to Gannon Dunkerley because Gannon Dunkerley requested Official Liquidator to transfer the leasehold rights in favour of a nominee of Gannon Dunkerley. It was MIDC's case that it was a further transfer and therefore, it was entitled to payment of premium in a sum of Rs.55,00,000/-. When this was challenged by Gannon Dunkerley by way of judge's summons, it was submitted by MIDC that the Company Court had no jurisdiction as MIDC was a third party unconcerned with the winding up Gauri Gaekwad 21/40 906.OLR-466-2016-1.doc proceedings. The Company Court held that it has jurisdiction (only by reference to Section 457 of the Act and despite not noting Section 446(2)
(d)) to consider the correctness of the demand of differential premium made by MIDC on such transfer. After reviewing the transfer guidelines of MIDC, the Court exercised this jurisdiction and held that differential premium is not payable and that the applicants shall pay 'standard transfer fees'. Paragraphs 15 to 18 of the said judgment reads as under :
15. By judge's summons herein, i.e., Company Application No. 261 of 1995, the applicants have sought a direction from this court as company court to respondents Nos. 1 to 3 not to press for payment of premium in a sum of Rs. 65 lakhs (rupees sixty-five lakhs) and set aside the demand made by respondent No. 1, for payment of such premium by its letter dated January 6, 1995, copy whereof is exhibit "A" to the affidavit in support of the judge's summons. By this judge's summons the applicants have also sought a direction from this court to respondents Nos. 1 to 3 to transfer the leasehold rights in respects of the eight plots of land referred to hereinabove in favour of applicant No. 2.
16. Learned counsel for respondent No. 1 has raised several contentions at the Bar while opposing the application herein.
17. The first question which arises for consideration of the court is as to whether this court has jurisdiction to entertain the application made by the applicants herein, i.e., Company Application No. 261 of 1995.
18. Shri R. M. Bardey, an officer of respondent No. 1, has filed his affidavit dated November 17, 1995, and has formulated the above-
referred objection as set out in para 2 of the said affidavit. It is contended that the application herein does not come within the ambit of section 446 of the Act, which has no application at all to this proceeding. It is contended that the State Bank of Hyderabad being a secured creditor was outside the winding up proceedings and respondent No. 1 as a third party is unconcerned with the winding up proceedings herein. 24 Hence, Section 446 (2) (d) of the Companies Act, 1956 is a very wide provision to empower the Company Court to decide all questions, which may relate to or rise in course of the winding up of the company. This Gauri Gaekwad 22/40 906.OLR-466-2016-1.doc power is bolstered by provisions of Section 456 and Section 457 of the Companies Act. The issue as to whether MIDC is entitled to any of the charges, viz., differential premium or extension charges and whether the transfer is a formal transfer or non-formal transfer certainly relates to and rises in the course of the winding up of the company. Though the property had been leased to the company (in liquidation), the leasehold rights in the property belong to the company and therefore, it is in the custody of the Liquidator, who had infact taken possession and under Section 457, Official Liquidator in a winding up by the Court has power, ofcourse with the sanction of the Court, to sell the leasehold rights. Since this relates to an asset of the company, viz., the leasehold rights, it certainly relates to and arises in course of the winding up of the company.
Therefore, this Court has jurisdiction to decide the prayer sought in Official Liquidator's Report and Official Liquidator need not go to a Civil Court or file a writ petition under Section 226 of the Constitution of India.
DIFFERENTIAL PREMIUM :
25 It is the case of MIDC that as per the policies framed by MIDC, it has recognised two categories of transfer, viz., formal transfer and non-formal transfer. The formal categories of transfer, as per the circular dated 12th May 1998 read with its resolution annexed thereto, will be "all Gauri Gaekwad 23/40 906.OLR-466-2016-1.doc involuntary transfers including amalgamation, demergers, etc. under the direction of the Competent Court/Tribunals/appropriate Government not being this nature of permission and shall be permitted on recovery of the transfer charges. According to MIDC, when the transfer falls under a formal category, no differential premium is charged, whereas in the case of non-formal transfers, such transfers will be permitted subject to the recovery of the differential premium and the differential premium will be either 10% or 30% depending whether the Licensee/Lessee has constructed or consumed atleast 10% of the permissible F.S.I. of the plot area. 26 The circular dated 12th May 1998 reads as under :
The formal categories of transfer will be only following :
1. ...........
2. ...........
3. All involuntary transfers including amalgamation, demergers etc. under the direction of the Competent Court/Tribunals/appropriate Government not being this nature of permission and shall be permitted on recovery of the transfer charges.
.............
NON-FORMAL TRANSFERS Any other transfer which do not cover under the formal transfers referred to above will be treated as a NON FORMAL transfer and the same will be permitted subject to the recovery of the differential premium as mentioned below :
1. Whether the Licensee/Lessee has constructed or consumed at-least 10% of the permissible F.S.I. of the plot area, such transfer will be permitted on recovery of the 10% of the differential premium.
2. Where the condition at (1) above is not fulfilled, i.e., has not constructed at least 10% of the permissible F.S.I. of the plot area such Gauri Gaekwad 24/40 906.OLR-466-2016-1.doc transfer will be permitted on recovery of the 30% of the differential premium.
2.A. "Differential Premium" in respect of land shall mean the difference between the occupancy premium amount for the plot calculated at the land rates prevalent at the time of receipt of the application of the transfer by the Corporation and the amount calculated at the land rates prevalent at the time of initial allotment in favour of the transferor.
The Board of MIDC by its resolution no.3314 passed on 18th April 1998 approved the revised transfer guidelines set out in the above circular. The said resolution contains a statement which provides a description of transfers and whether such transfers constitute formal or informal transfers. Item (m) of the said statement provides as follows:
Sr. Description As per As per
No. existing proposed
guidelines guidelines
m) i) Involuntary transfer by operation of law Formal Formal
viz. Amalgamation of Companies. transfer transfer
ii) Amalgamation/Restructuring/Merger
occasioned as per BIFR orders
27 MIDC brought out another circular dated 12th December 2011
as it felt that there was an ambiguity in Clause 3 of the 1998 circular and it introduced the following changes in Clause 3 of the formal categories of transfer in transfer guidelines dated 12th May 1998. The change/amended Clause 3 reads as under :
3. a) All involuntary transfers pursuant to any order/scheme of the Gauri Gaekwad 25/40 906.OLR-466-2016-1.doc Competent Court/Tribunals/appropriate Government/BIFR/AAIFR etc. shall be permitted on recovery of the standard transfer charges (STF) and not differential premium.
b) ...........
28 Shri Chawan relying upon an unreported judgment of Division Bench of this Court in M/s. Colour Tech Coating (I) Pvt. Ltd. V/s. Maharashtra Industrial Development Corporation and Ors.5 submitted that a sale by Official Liquidator would be a voluntary transfer because any prospective buyer would have voluntarily opted to participate in the bid offered by Official Liquidator and hence Clause 3 will not apply to the transfer.
29 It is settled law while deciding any issue, the order has to be read in the context of the factual matrix of the case and has to be read as a whole. It is well settled that an order of a court must be construed having regard to the facts and context in which the same was passed. For that, the order has to be read in its entirety. Observations made should not be read in isolation or out of context [Goan Real Estate and Construction Limited and another V/s.. Union of India6].
30 In my view, M/s. Colour Tech (Supra) is not applicable to the facts and circumstances of the case. In M/s. Colour Tech (Supra), MIDC had granted lease in respect of a plot to M/s. Ramniklal Raoji and Co. Pvt. Ltd.
5. Writ Petition No.2288 of 2014 dated 4th February 2015
6. (2010) 5 SCC 388 Gauri Gaekwad 26/40 906.OLR-466-2016-1.doc The lease was transferred to M/s. Fluid Air (I) Pvt. Ltd. M/s. Fluid Air had taken loan from Bank of Baroda and as a security of payment of loan, the plot was mortgaged by M/s. Fluid Air with Bank of Baroda. M/s. Fluid Air had committed a default and therefore, Bank of Baroda made an application before Debt Recovery Tribunal (DRT). A recovery certificate was issued by DRT and the plot was put to auction in execution of the said recovery certificate. The bid of M/s. Colour Tech was accepted and the sale was confirmed. The sale certificate was issued and registered and M/s. Colour Tech was put in possession. The dispute arose about the demand of differential premium made by MIDC as a condition for transfer of the said plot in the name of M/s. Colour Tech and MIDC demanded 30% differential premium for the transfer. This was challenged in this Court by way of writ petition under Article 226 of the Constitution of India. 31 The Court came to a conclusion that the circular dated 12 th May 1998 issued by MIDC provided for transfers in two categories, viz., formal transfers and non-formal transfers and as the plot was put to auction by the Bank of Baroda in execution of the recovery certificate that it got from DRT and M/s. Colour Tech had voluntarily opted to participate in bid, Clause 3 of the circular dated 12th May 1998 will not apply to the transfer and the transfer cannot be said to be an involuntary transfer. It should be noted that when a property is sold based on a recovery certificate issued by DRT, the Gauri Gaekwad 27/40 906.OLR-466-2016-1.doc sale is conducted by the secured creditor and the sale proceeds actually go to the mortgagor or the company and the creditor appropriates the sale proceeds in satisfaction of its claim against the debtor. The debtor, i.e., the company or lessee is still in existence and it gets credit for the sale proceeds. In our case, the lessee, viz., the company is in liquidation and it is not the company that is receiving the sale proceeds but Official Liquidator of the company is collecting the sale proceeds to distribute it amongst the various creditors. Official Liquidator does not get to appropriate any money. Therefore, the facts are totally dis-similar and the judgment in M/s. Colour Tech (Supra) relied upon by Shri Chawan is not applicable to this case in hand. In M/s. Colour Tech (Supra) also the transfer would be made by the Recovery Officer of the DRT to the purchaser but in the case where the sale is by Liquidator pursuant to an order passed by the Company Court, it certainly will be an involuntary transfer. It is not the case where the company is volunteering to transfer or mortgagee is transferring the property. The assets of the company are being liquidated by the Liquidator for the benefit of all the creditors, which would include workmen. Therefore, a transfer by Liquidator pursuant to an order of the Company Court is certainly an involuntary transfer. The circular infact is so widely worded that it says all involuntary transfers pursuant to any order of the Competent Court shall be permitted on recovery of standard transfer Gauri Gaekwad 28/40 906.OLR-466-2016-1.doc charges and not differential premium. If a sale by Official Liquidator on orders of the Court while liquidating assets of the company (in liquidation) cannot be an involuntary transfer, I fail to understand what would fall under the category of involuntary transfer. To a specific query raised to Shri Chawan, he was unable to even explain what should happen to call it involuntary transfer.
32 Shri Chawan relying upon a judgment of the Apex Court in M/s. Parasram Harnand Rao V/s. M/s. Shanti Parsad Narinder Kumar Jain and Anr.7 submitted that Official Liquidator merely steps into the shoes of the lessee, i.e., the company (in liquidation) and further submitted that the Apex Court in this judgment has held that a transfer by Official Liquidator will be a voluntary transfer and not an involuntary transfer. Shri Chawan submitted that this judgment has been accepted and relied upon by the Apex Court in Singer India Limited V/s. Chander Mohan Chadha and Ors.8 33 In my view, both these judgments are not applicable to the facts and circumstances of our case. In M/s. Parasram Harnand Rao (Supra), the Court was interpreting the provision of Section 14 (1) (b) of the Delhi Rent Control Act. The tenant in the premises was Laxmi Bank, which was ordered to be wound up and in that winding up proceeding, the Court appointed
7. (1980) 3 SCC 565
8. (2004) 7 SCC 1 Gauri Gaekwad 29/40 906.OLR-466-2016-1.doc Official Liquidator, who sold the tenancy rights in favour of one S.N. Jain. The sale was confirmed by the High Court and the said S.N. Jain took possession of the premises. The landlord filed a petition for eviction of Laxmi Bank and the High Court held that as the transfer in favour of S.N. Jain by Official Liquidator was confirmed by the Court, he acquired the status of the tenant by operation of law and therefore, the transfer of the tenancy rights was an involuntary transfer and the provisions of Section 14 (1) (b) of the Delhi Rent Control Act would not be attracted. Reversing the judgment, the Apex Court held that Official Liquidator had merely stepped into the shoes of Laxmi Bank under the orders of the Court which was on behalf of the original tenant - S.N. Jain. It was further held that the sale was a voluntary sale, which clearly was within the mischief of the section and assuming that the sale by Official Liquidator was an involuntary sale, it undoubtedly became an assignment as provided by Section 14 (1) (b) of the Act.
34 Therefore, the Apex Court was interpreting the provisions of Section 14 (1) (b) of the Delhi Rent Control Act. It will be useful to reproduce Section 14 (1) (b) of the Act, which reads as under:
"14. Protection of tenant against eviction.-- (1) Notwithstanding anything to the contrary contained in any other law or contract, no order or decree for the recovery of possession of any premises shall be made by any court or Controller in favour of the landlord against a tenant:
Provided that the Controller may, on an application made to him in the prescribed manner, make an order for the recovery of possession of the premises on one or more of the following grounds only, namely Gauri Gaekwad 30/40 906.OLR-466-2016-1.doc
(a)
(b) that the tenant has, on or after the 9th day of June, 1952 sub-
let, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord.."
There is no ambiguity in the Section and it clearly says that if, without obtaining the consent in writing of the landlord the tenant has, on or after 9.6.1952, (i) sub-let, or (ii) assigned, or (iii) otherwise parted with the possession of the whole or any part of the premises, he would be liable for eviction. The applicability of the Section depends upon occurrence of a factual situation, namely, sub- letting or assignment or otherwise parting with possession of the whole or any part of the premises by the tenant. Whether it is a voluntary act of the tenant or otherwise and also the reasons for doing so are wholly irrelevant and can have no bearing. This view finds support from an earlier decision rendered in M/s. Parasram Harnand Rao vs. M/s. Shanti Prasad Narinder Kumar Jain and another AIR 1980 SC 1655 wherein Section 14(1)(b) of Delhi Rent Control Act came up for consideration. The tenant in the premises, was Laxmi Bank, which was ordered to be wound up and in that winding up proceeding, the Court appointed an Official Liquidator who sold the tenancy rights in favour of S.N. Jain on 16.2.1961. The sale was confirmed by the High Court and, as a result thereof, S.N. Jain took possession of the premises. Thereafter, the landlord filed a petition for eviction of Laxmi Bank. The High Court held that as the transfer in favour of S.N. Jain by the Official Liquidator was confirmed by the Court, he acquired the status of the tenant by operation of law and, therefore, the transfer of the tenancy rights was an involuntary transfer and the provision of Section 14(1)(b) of the Act would not be attracted. Reversing the judgment, this Court held that the Official Liquidator had merely stepped into the shoes of Laxmi Bank which was the original tenant and even if the Official Liquidator had transferred the tenancy interest to S.N. Jain under the orders of the Court, it was on behalf of the original tenant. It was further held that the sale was a voluntary sale, which clearly was within the mischief of the Section, and assuming that the sale by the Official Liquidator was an involuntary sale, it undoubtedly became an assignment as provided by Section 14(1)(b) of the Act. The Court further held that the language of Section 14(1)(b) is wide enough not only to include any sub-lease but even an assignment or any other mode by which possession of the tenanted premises is parted and the provision does not exclude even an involuntary sale. 35 Further the Apex Court did not say that it was a voluntary sale because the Court also went ahead and said assuming it was an involuntary Gauri Gaekwad 31/40 906.OLR-466-2016-1.doc sale, still it would be hit within the mischief of the section. Section 14 did not have any separate categories for voluntary and involuntary sale as stated in the circular of MIDC. Section 14 also did not have anything like formal and non-formal transfer and certainly the Apex Court was not interpreting Clause 3 of the MIDC circular dated 12th December 2011. The wordings of Section 14 (1) and the circular are as different as chalk and cheese. It was once again asked to Shri Chawan as to what according to him would be an involuntary sale, Shri Chawan unconvincingly stated perhaps BIFR orders confirmed by the Court though that is not the wording of the circular. Therefore, I would proceed on the basis that even Shri Chawan and hence MIDC, had no idea as to what then should be an involuntary transfer pursuant to any order of the Competent Court.
36 Shri Jagtiani submitted that when a company is in liquidation, Official Liquidator has no option but to liquidate all the assets to pay the creditors and it does not see to reason that MIDC, as submitted by Shri Chawan, would say that no differential premium is required to be paid when the company is being restructured in BIFR cases but when it is being wound up by the Company Court, differential premium will have to be paid. Shri Jagtiani submitted and rightly so, that it defies rationale because in BIFR re-structuring, the company is being kept alive for profit to be made and creditors paid off but in a winding up proceeding it is to liquidate the Gauri Gaekwad 32/40 906.OLR-466-2016-1.doc assets of the company and to pay off the creditors.
37 One more reason why Shri Chawan's submissions that in a sale by Official Liquidator differential premium has to be paid cannot be accepted, is initially, the position under the 12th May 1998 circular was that formal categories of transfers included all involuntary transfers including amalgamation, demergers, etc. under the direction of the Competent Court/Tribunals/appropriate Government. The statement to the resolution passed by the Board of MIDC further clarified that involuntary transfers by operation of law, viz., amalgamation of companies and amalgamation/ restructuring/merger occasioned as per BIFR orders would be considered as formal transfers.
38 On a bare reading of the 12th May 1998 circular, it is clear that the transfer of leasehold rights which is an asset of a company in liquidation, either by the BIFR or the Company Court, would qualify as a formal transfer and accordingly no differential premium would be payable on the same. Since mergers or amalgamations or similar arrangements under Section 391-394 of the Companies Act had the effect of transferring the leasehold rights from the target company to the acquiring company, MIDC found (and it was also their policy) that such arrangements which eventually require sanction of the court, were considered formal transfers and accordingly, no differential premium was payable. Since such Gauri Gaekwad 33/40 906.OLR-466-2016-1.doc arrangements were otherwise in the ordinary course of business (in that the companies to the merger were going concerns and the merger/demerger was for economic/commercial reasons) and were undertaken to obtain a specific commercial advantage, the circular dated 12th December 2011 was issued stating that voluntary arrangements under Section 391-394 of the Act would be categorised as non-formal transfers on which differential premium is liable to be paid. The underlying rationale would appear to be that simply because a court sanction is necessary to give effect to such a scheme of arrangement should not deprive MIDC of its legitimate revenue on such transfer, which is, in effect, a voluntary transfer between parties at arm's length.
39 Therefore, vide the 12th December 2011 circular, MIDC amended the 12th May 1998 circular and carved out a species of transfers which were effected pursuant to court orders, which transfers would be categorised as non-formal transfers, namely any scheme of amalgamation, takeover, merger or demerger etc. between two or more entities in the ordinary course of business as part of their corporate/business strategy. Such transfers would be subject to payment of differential premium. The language of the 12th December 2011 circular would not alter the position of sale in liquidation still being a formal transfer on which no differential premium is payable. This is because, the sale by the Official Liquidator is not Gauri Gaekwad 34/40 906.OLR-466-2016-1.doc like a voluntary willing buyer - willing seller sale, but the consequences of winding up. It is also under express orders of the Company Court. Hence it squarely falls within the definition of formal transfers under the 12th December 2011 circular.
40 An aid to interpretation is that sales under BIFR schemes, according to Shri Chawan, are formal transfers. Therefore, under SICA (Sections 17(3) and 18(11)) in a restructuring scheme to revive the company, a sale of MIDC lease/assets by the Operating Agency was to be treated as a formal transfer. It would be wholly anomalous and illogical to treat a sale in winding up as a non-formal voluntary sale.
Yet another aid to interpretation is the use of the expression "ordinary course of business" in connection with transfers by the process of merger, amalgamation, demerger. This indicates that where such transfers, even if sanctioned by the court, are part of business (i.e. commerce and not necessarily day to day business alone) then such transfers of MIDC land will be voluntary and shall attract differential premium. The position of the company in winding up is the very opposite of ordinary course of business because the company is not carrying on business and is being wound up instead. Hence, it would be reasonable and logical to treat this situation differently under the extant MIDC circulars as forming part of the category of formal/involuntary transfers that do not attract differential premium.
Gauri Gaekwad
35/40 906.OLR-466-2016-1.doc
41 It was specifically clarified in the 12th December 2011 circular
that involuntary transfers pursuant to any order/scheme of the Competent Court/Tribunals/appropriate Government/BIFR/AAIFR etc. shall be permitted on recovery of the standard transfer charges and not differential premium. If transfers pursuant to DRT orders are formal transfers, where the company whose assets are transferred is still a going concern, is one more circumstance in support of the position that transfers of MIDC land as part of winding up are also formal transfers.
42 In the circumstances, as I am holding that a sale by Official Liquidator pursuant to orders of the Court will be formal and involuntary transfer, MIDC will not be entitled to any differential premium but only to standard transfer charges.
43 To Shri Chawan's submissions that this Court cannot decide what would be the premium or only a Civil Court can hear after MIDC passes an order on a transfer application, I am not deciding the quantum. I am only deciding whether differential premium is chargeable or not and I have said it is not. Once this is done, certainly it will be easier to liquidate the assets of the company.
EXTENSION CHARGES :
44 It is MIDC's case that as per circular no.B-73864 dated 10th June 2013 in case of formal and non-formal transfer, if the time limit Gauri Gaekwad 36/40 906.OLR-466-2016-1.doc for development of the plot has been exhausted, then the plot shall not be transferred without recovery of extension charges. This includes the transfer done through financial institutions also, except the cases wherein the appropriate Court has given specific directions for non-recovery of extension charges.
45 Clause 8 of the circular dated 10 th June 2013 provides that the Competent Court may order that such extension charges are not to be paid. 46 Shri Jagtiani submitted that in the facts of the present case, since the Company Court is seized of the sale and transfer of the immovable properties of the company in liquidation, it is the Competent Court as contemplated by Clause 8 of the said circular dated 10 th June 2013. The identification of the Competent Court is dependent on the context of the proceeding in question. For instance, if an otherwise healthy and solvent company was directed by MIDC to pay extension charges under the circular dated 10th June 2013, which the said company found unreasonable or incorrect, the company would be entitled to challenge the demand by MIDC before the appropriate Writ Court. In such a case, the Court would have jurisdiction to hear this challenge (i.e. the Writ Court) and would be the competent court in terms of the said circular dated 10 th June 2013 which may, exercising its discretion, direct that such charges are not to be paid. In any event, Shri Jagtiani submitted that at this stage, when there is no Gauri Gaekwad 37/40 906.OLR-466-2016-1.doc identified purchaser of the subject property, the Official Liquidator is not seeking that the extension charges indicated by MIDC be waived. The Official Liquidator, at this stage, restricted its prayer to a declaration that in these present facts, this Court is the Competent Court as contemplated by Clause 8 of the circular dated 10th June 2013 which has jurisdiction to consider the question of waiver of extension charges, as and when it may arise.
47 Shri Chawan contended that the Company Court is not the Competent Court. Curiously, MIDC does not indicate which would be the competent court. There is no forum or authority or Tribunal under the MID Act that would be the Competent Court to exercise the power under Clause 8 of the abovementioned circular. Hence the Competent Court in the situation of winding up would necessarily include the Company Court, i.e., this Court.
48 The allotment of Plot No.A-26/3 was made on 24 th November 1994 and 11th January 1995. MIDC executed an Agreement to Lease with the company (in liquidation). The second plot bearing No.A/26/2/2 was alloted on 20th June 1995 to the company and on 16 th April 1996 MIDC executed a pre-determined Lease Agreement in respect of the said plots. The company came to be wound up on 22nd January 2008. For almost 14 years when the agreement required completion of building and structure within Gauri Gaekwad 38/40 906.OLR-466-2016-1.doc 36 months, MIDC did not even lift a finger. MIDC slept over the whole thing. After the company was ordered to be wound up and Liquidator took possession of the said plots and issued advertisements in the newspapers, MIDC still did not come forward to lodge its claim but for reasons best known to MIDC started communicating with the company, which had already been ordered to be wound up, on the completion certificate for the buildings. First of such letter is dated 16th May 2008 whereby MIDC called upon the company to submit the certificate on or before 31 st December 2008.
49 Shri Chawan relied upon the provisions of the MIDC Act 1961 and MIDC Disposal of Land Regulations 1975 to explain the Court the aim and objects of the Act and the powers of the corporation under the Act and the regulations framed pursuant to the Act. Shri Chawan submitted that as the aim of the government in legislating this Act was to make special provision for securing the orderly arrangement in the industrial areas and industrial estate of industries in the State of Maharashtra and to state generally in the organisation thereof, the extension charges certainly have to be paid otherwise it will be a drain on the exchequer. Shri Chawan also submitted that if any allotee contravenes any of the terms and conditions of the Agreement to Lease, the corporation shall be entitled to redeem possession of the plot. Shri Chawan submitted that it is true that the Gauri Gaekwad 39/40 906.OLR-466-2016-1.doc corporation had, by its letter dated 16 th May 2008, granted extension to complete construction on the said plots but that extension was only to submit building completion certificate by 31st December 2008 subject to approval and the company never submitted any building completion certificate or sought any extension. Shri Chawan also stated that as per the Act and the regulations and the circulars issued pursuant to the regulations, the company will have to pay extension charges. Shri Chawan also submitted that in this case even though the affidavit in reply has stated that the Competent Court can waive extension charges, Official Liquidator always steps into the shoes of the company and should not be granted any waiver.
50 In my view, for MIDC to claim the extension charges upto the date of winding up or even beyond upto the sale of the property, MIDC has to lodge its claim with Official Liquidator. This is because the extension charges have already accrued in favour of MIDC as against differential premium, which will have to be paid and determined, if payable only at the time of considering the transfer application of a transferee. Therefore, for extension charges, Official Liquidator to consider while adjudicating MIDC's affidavit of proof of debt and decide the quantum of extension charges, if any payable and for what period, whether upto the date of winding up or any earlier period or it is continuing. I am not making any observation with Gauri Gaekwad 40/40 906.OLR-466-2016-1.doc regard to extension charges and that can be decided at the appropriate stage.
51 Therefore, (a) I hold that this Court will be the Competent Court and has jurisdiction to decide whether MIDC is entitled to claim differential premium and extension charges; (b) in a sale of leasehold rights by Official Liquidator, it will be a formal and involuntary sale and therefore, no differential premium is payable to MIDC by Official Liquidator but only standard transfer charges and (c) extension charges whether payable and to what extent can be decided at the appropriate stage once MIDC lodges its claim with Official Liquidator.
52 Official Liquidator's report accordingly stands disposed.
Digitally
signed by
Gauri Gauri Amit
Gaekwad
Amit Date:
(K.R. SHRIRAM, J.)
Gaekwad 2018.07.26
19:11:13
+0530
Gauri Gaekwad