Calcutta High Court
Shree Cement Limited vs The Official Liquidator And Another on 31 March, 1993
Equivalent citations: AIR1994CAL90, 98CWN288, AIR 1994 CALCUTTA 90, (1994) 3 COMLJ 123, (1994) 14 CORLA 79, (1994) 2 RENTLR 123, (1994) CAL WN 288, (1995) COMNR 223
ORDER Prabir Kumar Majumdar, J.
1. This appeal is from the Judgment and Order dated December 2, 1992, passed by a learned Judge of this Court taking company matters.
2. Shalimar Rope Works Limited (hereinafter referred to as the Company) had a guest house at Maharani Bag, New Delhi. The landlord of the said guest house is the respondent No. 2 in this appeal, viz., Arvinder Singh Sabharwal. The company was the tenant under the said landlord in respect of the said guest house at Maharani Bag, New Delhi. The company was ordered to be wound-up by an order of this Court dated June 10, 1991.
3. The appellant before us, Shree Cement Ltd.. claims to be a sub-tenant in respect of the said guest house at Maharani Bag, New Delhi. Upon liquidation of the company, the Official Liquidator took possession of the assets of the company on November 18, 1991. The Official Liquidator also took possession of the said guest house and put the same under lock and key. The landlord, the respondent No. 2 in this appeal, made an application under S. 535 of the Companies Act, 1956 (hereinafter referred to as the Act), for a direction upon the Official Liquidator to disclaim the tenancy of the company in his favour. The appellant also had filed a separate application under S. 535(6) of the Act for vesting the tenancy of the company in the appellant. The appellant took out a Judge's Summons before the Court of first instance on January, 25, 1992 claiming, inter alia, (a) leave be granted to the Official Liquidator to disclaim the guest house being premises No.C-22, (Old No.C-71), Maharani Bag, New Delhi, more fully mentioned in the Agreement dated 29th July, 1970, being Annexure-A, and vest the same in favour of the applicant-company as a sub-tenant thereof, subject to and upon the same liabilities and obligations as embodied in the said Agreement dated 29th July, 1990: and (b) direction be given to the Official Liquidator to hand over possession of the said Guest House together with all the assets and properties to the applicant-company.
4. The appellant is claiming to be the subtenant in respect of the said guest house under the erstwhile company, being Shalimar Rope Works Ltd. The appellant rests its claim as to sub-tenancy on the document dated 25th February, 1987 (which is at page 23 of the Paper Book). It is stated in the said letter dated 25th February, 1987 addressed by the erstwhile company to the appellant that under Cl. (6) of the lease-agreement dated July 29, 1970 the company was empowered to sub-let the guest house to the appellant and accordingly, the company confirmed and placed on record by the said letter that in consideration of the appellant's having agreed to allow the company's Directors and Officers to use and occupy the guest house free of any charge from time to time subject to the availability, the appellant should hold, possess and enjoy the guest house under the company as a subtenant on the same terms and conditions as embodied in the lease dated 29th July, 1970. It is also mentioned in the said letter that electricity, water, telephone and other charges and expenses relating to the enjoyment of the said guest house should also be borne by the appellant.
5. The said lease dated 29th July, 1970, inter alia, contained the following clause as to sub-letting :--
"6. That the lessee shall not sub-let the premises in part or whole without prior written consent of the lessor to any third party (But to any of his subsidiary sister concerns excepted)."
6. The issue before the learned Judge in the Court of first instance was whether the appellant was a sub-tenant in respect of the premises-in-question and, if so, whether the appellant was entitled to an order of vesting under S. 535(6) of the Act. S. 534(6) of the Act is as follows :--
"The Court may, on an application by any person who either claims any interest in any disclaimed property or is under any liability not discharged by this Act in respect of any disclaimed property, and after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery of the property to, any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just; and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance of assessment for the purpose:
Provided that, where the property disclaimed is of a leasehold nature, the Court shall not make vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or holder of a charge by way of demise, except upon the terms of making that person-
(a) subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding-up or
(b) if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date;
and in either event if the case so requires as if the lease had comprised only the property comprised in the vesting order; and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Court shall have power to vest the estate and interest of the company in the property in any person liable, either personally or in a representative character, and either alone or jointly with the company to perform the lessee's covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company."
7. The learned Judge by the judgment and order under appeal found that the appellant failed to establish even prima facie that the appellant was the sub-tenant under the erestwhile company in respect of the said guest house. Accordingly, the learned Judge refused to make any order for vesting of the property in the appellant as prayed for by the Judge's Summons taken out by the appellant. The learned Judge allowed the application taken out by the landlord, the respondent No. 2 in this appeal, for disclaimer of the property.
8. Now, the question in this appeal is whether the appellant has any interest in the property sought to be disclaimed and whether by reason of such interest in the property is entitled to an order for vesting in terms of sub-sec. (6) of S. 535 of the Act. This will turn on the question whether the appellant is the sub-tenant in respect of the guest house. We have set out above Cl. 6 of the Lease dated 29th July, 1970. In terms of the said clause of the Lease, no sub-letting can be made partly or wholly without prior written consent of the lessor to any third party. This clause, however, states: "but to any of his subsidiary sister concerns excepted."
9. It has been contended by the respondent landlord that the alleged subletting has not been made by the landlord by giving consent in writing prior to the alleged subletting. Counsel for the appellant however submits that this document of lease dated 29th July, 1970 itself contemplates consent and the document being in writing the consent should also be deemed as consent in writing. The learned counsel for the appellant contends that this clause specifically says that prior written consent of the lessor would be required if the subletting is made in favour of a third party, but if there is any subletting to any subsidiary or to a sister concern of the lessee, that is the said erstwhile company, Shalimar Ropeworks, then the consent is implied in the said Indenture of Lease, which is in writing. Therefore, the requirement of prior written consent is satified when the subletting is in favour of the subsidiary of the lessee, that is, Shalimar Ropeworks.
10. The learned counsel for the appellant has referred to a decision of Supreme Court , South Asia Industries Private Ltd. v. Sarup Singh. In this case there are three separate judgments. Mr. Justice Sarkar (as he then was) interprett-ing S. 14 of the Delhi Rent Control Act observed as follows:
"I am also inclined to the view that the consent contemplated by S. 14(1), Proviso (b) is a direct consent to a contemplated assignment to a particular assignee. See Regional Properties Ltd. v. Frankenschwerth, (1951) 1 All ER 178. Clearly the clause in the case relied upon could not he a consent of this kind. This point, therefore, also fails."
11. Mr. Justice Bachawat (as he then was) delivering a concurrent judgment also observed as follows:--
"The consent in writing within the meaning of paragraph (b) of the proviso to S. 14(1) may be either general or special, but no such consent was given by Cl. (7). The effect of Cl. (7) is that the assignee of the lease enjoys the benefits and is subject to the burden of the convenants in the lease, but the clause does not amount to a consent by the landlord to an assignments either expressly or by necessary implication."-
There also it was contended that Cl. (7) of the parent agreement also contemplated consent in writing. Interpreting such Clause (7) Bachawat, J. made the above observation. Relying on such decision the counsel for the appellant contended that here also Cl. (6) was to be taken as giving a consent in writing to the subletting in favour of the appellant.
12. The appellant has also referred to another decision in support of this contention which is , M/s. Giridhari Lal & Sons v. Balbir Nath Mathur and others, where it has been inter alia observed that the requirement is that the essence of the consent of the landlord to the to the sub-tenancy and the notice of the creation of the sub-tenancy have to be evidenced by writing. The writing relating to the consent and the writing relating to the knowledge (notice) may be by different documents or they may telescope into the same document. There is no magical form in which the consent is to be given nor any charm in form in which the notice is to be sent. In this case the Supreme Court also noticed that the agreement of sub-tenancy was attested by the landlord and, from that the Supreme Court came to the conclusion that there has been a consent of the landlord in writing and the landlord has notice of such sub-tenancy.
13. The learned counsel for the respondent landlord has submitted that the written consent as contemplated in S. 16 of the Delhi Rent Control Act as also S. 14 thereof envisages a consent in writing and that should be a separate consent in respect of a particular subletting and the consent cannot be in a general form as sought to be contended by the appellant. The respondent landlord referred to a decision of the Supreme Court , Shalimar Tar Products Ltd. v. H.C. Sharma. The Supreme Court observed in this case, accepting the view expressed by this Court earlier , that it was necessary for the tenant to obtain the landlord's consent in writing to sub-letting of the premises. The mere permission or acquiescence will not do. The consent must be to the specific sub-letting and must be in writing. The Supreme Court also accepted the view expressed by Sarkar, J. (as he then was) in South Asia Industries Pvt. Ltd. (supra) and accepting such view the Supreme Court in this case observed that the permission must have been in writing and specific in the words of Justice Sarkar in South Asia Industries Pvt. Ltd., . The respondent landlord has also referred to another Supreme Court decision , Shantilal Rampuria v. V. Vega Trading Corporation, in support of this proposition. There the Supreme Court observed as follows (at page 1822):--
"We are, therefore, of the view that previous consent in writing of the landlord with respect to each subletting separately is essential and a general authority to the tenant in this regard will not be sufficient in law."
14. It will thus appear that there must be a prior consent in writing and that consent should be referable to a specific sub-letting in respect of the specific premises. The learned trial Judge found that the appellant failed to establish its case of alleged sub-tenancy and there is nothing on record to show that there has been any prior written consent given by the landlord and also in respect of this specific sub-letting in respect of the said guest house. We agree with such finding arrived at by the learned trial Judge.
15. The learned counsel for the respondent landlord has also referred to sub-sec-tions(14), (16) and (17) of the Delhi Rent Control Act, 1958. Sub-sec. (16), inter alia, provides that no premises can be sub-let either in whole or in part without obtaining prior consent in writing of the landlord. S. 17 of the said Act requires inter alia, that where any premises are sub-let either in whole or in part by the tenant with the previous consent in writing of the landlord, the tenant or the subtenant to whom the premises are sub-let may, in the prescribed manner, give notice to the landlord of the creation of the sub-tenancy within one month of the date of sub-letting. It appears that the appellant has not also been able to show that this sub-letting was with a special consent of the landlord in writing prior to the sub-letting and further that the appellant or the erstwhile company had given notice to the landlord as contemplated in S. 17 of the Delhi Rent Control Act. It will also appear, as found by the learned trial Judge, that there had been two proceedings pending before the Rent Controller of Delhi initiated by the landlord and in such proceedings there is no reference as to the alleged sub-letting in favour of the appellant in respect of the said guest-house. The learned trial Judge has also found that there has been a letter written by a Director of the erestwhile company addressed to the Official Liquidator dated 4th December, 1991. Even in that letter there is no mention of any sub-letting in favour of the appellant. It has also been found by the learned trial Judge that during the pendency of the winding up proceedings a Special Officer was appointed by this Court and when the Special Officer went to take possession of the guest house in Delhi, no one was found in possession of the said guest house not even the appellant. It was also found by the learned trial Judge that when the Official Liquidator went to take possession of the guest house in question there was no one found in possession of the guest house and the appellant was also not in possession of the guest house. It therefore, appears that the appellant became aware of his alleged subletting when there was an application by the landlord for disclaimer of the property under S. 535 of the Companies Act. We entirely agree with the finding of the learned trial Judge.
16. It also appears that the appellant has disclosed certain documents as to the payment of water charges, telephone charges and also rent receipts. The learned Judge carefully scrutinised those disclosure but the learned Judge found that the appellant by such documents had not been able to show that it was the appellant who made those payments directly to the landlord in respect of the said guest house. We have also looked into those documents as incorporated in the paper-book and from that we have not been able to find out that those payments were made by the appellant. All the rent receipts were issued in the name of the erstwhile company. In any event even by those documents the appellant is able to show that the appellant had been making those payment in respect of the guest house as also the rent, that would not by itself establish the sub-tenancy in favour of the appellant. We have already indicated above that it is a specific requirement of the Act as also of the said Cl. (6) of the said Indenture of lease that sub-letting has to be made with specific prior written consent in respect of the specific sub-letting. We have discussed above that the appellant has not been able to show that such specific written consent was given by the landlord for such sub-letting in favour of the appellant in respect of the said guest house. Also there is nothing on record to show that due notice of sub-letting was given either by the erstwhile company, the tenant, or by the appellant, alleged to be a sub-tenant, to the landlord as required under S. 17 of the Delhi Rent Control Act.
17. It has been contended by the appellant that the appellant is a subsidiary of the erstwhile company but there is nothing to show that the appellant is a subsidiary of the erstwhile company. Subsidiary company has been defined in S. 4 of the Companies Act which, inter alia, says that there must be a substantial control of the shareholding of the subsidiary or control in the composition of its Board of Directors. There is nothing on record to show that the erstwhile company had such control over the appellant. It is also stated by the appellant in its affidavit used in the Court of first instance that there are common directors of the erstwhile company and the appellant company, but that would not establish the fact that the appellant is the subsidiary of the erstwhile company. One may be a director of more than one company and that is not the criterion to find out whether one is a subsidiary of the other.
18. The learned Judge while disposing of the two applications -- one by the landlord and the other by the appellant-- under S. 523 of the Companies Act by the common judgment under appeal, allowed the landlord's application for disclaimer and made no order on the application taken out by the appellant except with regard to the movable assets. The learned Judge by the order under appeal fixed it for trial on evidence to find out who was the owner of the movable assets now lying in the guest house. If it is found on trial on evidence that the erstwhile company, now in liquidation, was the owner of the assets then the Official Liquidator would be asked to take possession of those assets and if it is found that the assets belonged to the appellant, then the appellant would be given liberty to take possession of the assets. Until that is found out on trial on evidence the disclaimer in favour of the landlord would not take effect. We do not disturb this finding. It is submitted that the matter is already pending before the Court of first instance as trial on evidence. In that view of the matter the Court of first instance may proceed with the trial on evidence and dispose of the same as early as possible.
19. We affirm the judgment and order under appeal in its entirety.
20. This appeal is dismissed. Interim orders, if any, are vacated. The appellant is to pay the costs of this appeal.
21. Counsel for the appellant prays for stay of the operation of this judgment and order. In view of the directions contained in the order under appeal as to the effect of the disclaimer order in favour of the landlord, we refuse this prayer for stay made by the appellant.
22. All parties are to act on a signed copy of the operative portion of this judgment on the usual undertaking.
Samaresh Banerjes, J.
23. I agree.
24. Appeal dismissed.