Allahabad High Court
Unknown vs Counsel For on 30 October, 2019
Author: Anjani Kumar Mishra
Bench: Anjani Kumar Mishra
HIGH COURT OF JUDICATURE AT ALLAHABAD ?Reserved Court No. - 9 Case :- MISC. COMPANY APPLICATION No. - 1 of 1995 Applicant :- In The Matter Of Vishnu Straw Boards Ltd. Counsel for Applicant :- O.L. S.K. Saxena,O.L. M.K. Bagri,S.N.Verma Counsel for Opposite Party :- Vivek Chaudhary,Avinash Swarup,Rahul Agarwal,Vikram Nath,Vishnu Gupta,Y.K. Srivastava Hon'ble Anjani Kumar Mishra,J.
Heard Shri Anurag Khanna, learned Senior Advocate for the applicant, M/s K.M. Sugar Mills Limited, Shri Shubham Agarwal for the Official Liquidator and Shri Nitin Agarwal for the State of U.P. Recall Application No. 5 of 2018 has been filed on behalf of M/s K.M. Sugar Mills Limited, Motinagar, Faizabad for recall of the order dated 04.01.2018, whereby the Official Liquidator was directed to take possession of the assets of M/s Vishnu Straw Boards Limited (in liquidation) and to file a report within ten days, thereafter.
14.5 acres of land belonging to the Company (in liquidation) had been auctioned in favour of the applicant, which order was set-aside on 16.12.2016 in Special Appeal No. 1216 of 2001. Since, the auction sale in favour of the applicant had been set-aside, possession of the assets, which had been given to the applicant in pursuance of an order by the Division Bench, was liable to be taken back by the Official Liquidator.
Facts of the case briefly stated are that certain land was acquired under the provisions of the Land Acquisition Act and the same was leased out by the State Government in favour of Kamlapat Motilal Gutaiya Sugar Mills, for a period of 99 years, vide lease deed, dated 26.05.1950.
Subsequently, with the permission of the State Government and by means of tripartite agreement between the main lessee M/s K.M. Sugar Mills Limited, the State Government, and M/s Vishnu Straw Boards Limited 14.5 acres of the leased land, were sublet to M/s Vishnu Straw Boards Limited, the Company (in liquidation).
An order was passed on 24.01.1995, winding up M/s Vishnu Straw Boards Limited and the same stood affirmed upon dismissal of the Special Appeal filed against it. Thereafter, the assets of the Company were put to auction and the Company Court accepted the sole bid of M/s K.M. Sugar Mills, the instant applicant, for Rs. 16 lacs.
This order was challenged by Bharat Jhunjhunwala, the Ex. Managing Director of M/s Vishnu Straw Boards Limited, by means of Special Appeal No. 1216 of 2001.
During the pendency of the appeal, possession over the assets bid for by the applicant, M/s K.M. Sugar Mills, was ordered to be handed over, which order was duly complied with by the Official Liquidator.
Upon dismissal of the Special Appeal, which set-aside the auction sale in favour of the applicant, order dated 04.01.2018 was passed, directing the Official Liquidator to take back possession of the assets and to proceed in terms of the directions contained in the order dated 16.01.2017 issued by the Division Bench.
This order dated 04.01.2018 is sought to be recalled on the ground that the State Government, vide order dated 11.09.2017, passed by the Deputy Secretary, Government of U.P., has cancelled the sub-lease dated 27.06.1955 and 14.5 acres of land, which was subject matter of this sub-lease has been directed to form part of the main lease of 26.05.1950. It is also stated that a supplemental lease deed in this regard, has been executed in favour of the applicant, M/s K.M. Sugar Mills on 19.09.2017.
Therefore, the possession of the applicant as on date, is not as a purchaser in the auction sale, which has admittedly been set-aside, but on account of orders passed by the State Government and the supplementary lease deed in that regard.
It has been submitted that since counsel for the applicant had not appeared before the Court when the order dated 04.01.2018 was passed, correct facts could not be placed before the Court.
Moreover, vide order dated 16.12.2016, passed by the Special Appellate Bench, the Official Liquidator had been directed to seek permission of the State Government for transfer of the lease rights of the Company (in liquidation) to third parties. The application for review of this order is pending. The order dated 04.01.2018, is therefore, liable to be recalled.
On behalf of State on the matter being called out, Shri Nitin Agarwal submitted that Shri Manish Goyal, Additional Advocate General is out of the country and therefore, the matter be adjourned.
The State Government has a substantially large panel of Counsel to represent it, including six Additional Advocate Generals.
Vide order dated 01.05.2019, after having heard Shri Anurag Khanna in support of the recall application, the matter had been adjourned to enable counsel appearing for the State of U.P. to make his submissions in the matter because Shri Anurag Khanna had submitted that it was for the State Government to defend its action insofar as cancellation of the sub-lease and execution of the supplementary deed was concerned. A prayer for adjournment was then made on behalf of the State. Thereafter, the matter had continued in the additional cause list for at least seven dates.
Accordingly, the prayer for adjournment was refused and the judgment reserved, after hearing Shri Nitin Agarwal, Counsel for the State.
On behalf of State of U.P., it has been reiterated that the sub-lease dated 27.10.1965 has been cancelled vide order dated 11.09.2017 and a cancellation/supplementary deed executed on 19 September, 2017.
It has additionally been submitted that the State Government was not fully aware of the facts of the case as it was not a party in the Company Petition or in the Special Appeal. The applicant, M/s K.M. Sugar Mills was duty bound to inform the State Government about the Special Appeal and the liquidation proceedings, which was not done. Even the pendency of the application for review of the order passed by the Special Appellate Bench, was not within the knowledge of the State Government.
The submission of Shri Shubham Agarwal, counsel for the Official Liquidator is that the action of the State Government is colourable and totally arbitrary exercise of power. The sub-lease in favour of M/s Vishnu Straw Boards Limited has been cancelled unilaterally and only with a view to provide undue benefit to M/s K.M. Sugar Mills, the applicant in this recall application. The action of the State is not sustainable.
I have considered the submissions made by counsel for the parties and perused the record.
The question up for consideration in this recall application is primarily whether the communication dated 11.09.2017, of the Deputy Secretary, Government of U.P., on page 138 of the recall application and the cancellation deed dated 19 September, 2017 on page 121 thereof, are legally sustainable.
To determine this issue, this Court finds it expedient to refer to the order passed by this Court on 13.01.1998, while dealing with an application (A-6), which had been filed by the present applicant, M/s K.M. Sugar Mills seeking a direction for return of the land, which is subject matter of dispute at present.
The Court observed; The operative word demise in a lease implies an absolute covenant on the part of the lessor or the person leasing for the lessees quiet enjoyment during the term for which the lease has been given.
and thereafter "It is trite that when the sub-lessees right will be transferred to a third party the said party will step into the shoes of the sub-lessee and will enjoy the same rights which were being enjoyed by the sub-lessee to whom the rights have been demised by the lessee as well as by the State Government by means of the deed of the year 1965."
The order thereafter categorically held that the terms of the sub-lease could be enforced only by the sub-lessee or the State Government.
The two lease agreements are between the lessees and the Governor of U.P. In the context of the arguments raised, I have carefully examined the main and the sub-lease deeds. Relevant portions whereof are extracted below. Clause 2 (vi) & (viii) and Clause 3 (i) & (ii) of the main lease read as follows:-
"Clause 2 (vi) That if at any time or times, any part or parts of the said land shall be necessary to be possessed by the State Government for the purposes of Revenue Administration or for purposes connected with public health, safety or emergency (of which matter the State Government shall be the sole judge) the lease shall be cancelled by the State Government for such parts of the said land as the State Government shall specify to be necessary for the purposes.
Clause 2 (viii) That in the event of a breach by the lessees of any of the terms and whole of the said land without payment of any compensation to the lessees and upon such re-entry by the lessor the lessees shall be entitled to remove within six months from the date.
Clause 3 (i) That the lessees paying the rent hereby reserved and observing the covenants hereinbefore contained may hold and enjoy the demised premises during the said term without any interruption by the lessor or any person whosoever.
Clause 3 (ii) That the lessor shall at the request and cost of the lessees at the end of the term of years hereby granted, shall execute to the lessees a new lease of the demised premises by way of renewal on the terms and conditions hereinbefore contained."
The relevant portions of the sub-lease are as follows:-
"..............the Lessee hereby demises to the Sub Lessee for the purposes of construction of a Board Factory and the workmen quarters attached to it, all that land fully described in the schedule hereto and for greater clearness delineated on the plan hereto annexed.
To hold the same to the sub Lessee from the First day of September 1965 for the residue now expired of the term of 99 years created by the aforesaid Lease deed dated 26th day of May, 1950, paying therefore to the Lessee the rent of Rs. 2/- per year to be paid in advance on the 1st day of the Fasli Year in each year, the first of each payment to be made to the Lessee on the first day of October, 1965, next.
0.2 The sub lessee hereby covenants with the Lessor that the sub lessee will at all times during the said term duly perform and observe all the covenants effectively the premises hereby demised which are contained in the head Lease dated the 26th day of May 1950 on the part of sub lease there under to be performed and observe except the covenant about payment of rent.
0.3 The Less hereby covenants with the Lessor through the Less will continue to pay to the Lessor the rent served in the head lease for the whole of the area demised thereunder.
04. The Lessee and the sub Lessee jointly and severally covenant and agree with the Lessor that the will be bound by the terms of the head lease and that shall be lawful for the Lessor to proceed against the Lessee and/or the sub lessee jointly and/or severally for breach of any conditions of the head lease in so far as these conditions relate to the premises mentioned is, the Schedule hereto, and have is referred to is attached."
Admittedly, the period of the sub-lease still subsists, as its period was for the balance period of the main lease for 99 years executed in the year 1950. The communication of the Deputy Secretary, Government of U.P. dated 11.09.2017, does not talk of any breach of any condition of the sub-lease/or main lease.
Section 111 of the Transfer of Property Act, 1882 deals with the determination of a lease and lists as many as 8 conditions enumerated from sub-sections a to h, thereof.
Sub-section h, which is relevant for the purposes of the instant case reads as follows:-
"(h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other."
Nothing has been submitted by counsel for the State of U.P. regarding compliance of the provisions of Section 111(h) of the Transfer of Property Act, 1882. On the contrary, the submission is that the full facts had not been disclosed to the State Government by the applicant, M/s K.M. Sugar Mills.
The order of the Deputy Secretary, Government of U.P. dated 11.09.2017 does not speak of any notice having being issued to the sub-lessee for cancellation of the sub-lease. Neither any reason has been assigned as to why the sub-lease has been cancelled.
In my considered opinion, since the order cancelling the sub-lease is a unilateral act, bereft of any reason and the same has been resorted without any notice having been given to the sub-lessee, namely M/s Vishnu Straw Boards Limited, on date, represented by the Official Liquidator after the passing of the winding-up order dated 24.01.1995, the same is void and wholly without jurisdiction as is the consequential document executed and registered in pursuance, thereof.
Besides, no order cancelling the sub-lease has been produced by the applicant or the State of U.P. The letter dated 11.09.2017 of the Deputy Secretary is a mere communication as is clear from its bare perusal.
In the absence of any written order having been produced, whereby the sub-lease has been cancelled, it is to be assumed that such decision is an oral decision. A registered document cannot be cancelled orally, especially when there is no breach of any condition mentioned in the registered sub-lease. Neither does the sub-lease contemplate or provide for such action. The action of the State of U.P. is therefore, without jurisdiction, arbitrary an altogether void.
It is therefore held that the order cancelling the sub-lease as also the consequential supplementary deed are void.
Since the documents, which are the basis of the applicant's claim to possession have been held to be void above, the very basis of the recall application does not exist.
Accordingly, the recall application lacks force and is rejected.
Official Liquidator to proceed as per the directions issued by the Division Bench in Special Appeal No. 1216 of 2001, the land subject matter of the sub-lease in favour of the Company (in liquidation).
Order Date :- 30.10.2019 Mayank