Calcutta High Court
Asoka Ghose And Ors. vs The Official Liquidator Of Remington ... on 2 September, 2003
Equivalent citations: (2003)3CALLT608(HC), [2004]121COMPCAS229(CAL), [2004]51SCL572(CAL)
JUDGMENT Mahemmad Habeeb Shams Ansari, J.
1. The instant matter has been assigned to this Court by the order dated August 5, 2003 of His Lordship the Chief Justice.
2. Judge's Summons have been taken out for leave to the applicants to make the application and for condonation of delay in making the application. The relief, prayed for is for an order directing the respondent-Official Liquidator to disclaim and/or give possession of the flat, more fully stated in the lease agreement dated May 24, 1985 being annexure 'A' to the affidavit filed in support of the Judge's Summons.
3. Brief facts based upon which the above reliefs have been prayed for are that the applicants are the owners and landlord of the flat which was given on lease to Remington Rand of India Limited (in liquidation) reliance for which purpose has been placed upon annexures 'A' and 'B'. The applicants through their advocate by a letter dated January 31, 2003 served a notice upon the Official Liquidator requesting him to disclaim the said flat. In reply Official Liquidator by his letter dated February 26, 2003 informed the applicants' advocate that in terms of the order of Court dated November 26, 2001 the Official Liquidator has been discharged from any liability in respect of taking any possession of the assets of the company (in liquidation) hence question of disclaimer of the said property by the Official Liquidator does not arise.
4. It is the case of the applicants that they came to know on or about November 28, 2002 that the company has gone in liquidation and upon further enquiries made by their learned advocate it was learnt that the company went into liquidation by an order dated November 28, 2002. It is further stated that at a later stage the learned advocate of the applicants came to know that by an order dated December 6, 1999 and November 26, 2001 the company went into liquidation and thus it is contended that the delay in filing the application needs to be condoned for the said reasons.
5. The substantive prayer is founded on the ground that the lease is for a certain duration and is expiring by efflux of time on December 31, 2000, in terms of the said lease deed (annexure 'A'). Clause IV(c) thereof has been heavily relied upon by the applicants wherein it is stipulated that the lease would cease and determine if tenant goes into liquidation. It was thereupon contended by Mr. P.C. Sen, learned senior advocate of the applicants that there is no saleable interest in the said property.
6. Above application is resisted, inter alia, by Shiv Sankar Pasari, erstwhile Managing Director of the respondent-Company (in liquidation) and pursuant to leave granted an affidavit-in-opposition has been filed by him. Mr. Talukdar led by Mr. P.C. Chatterjee, learned senior advocate, appeared on his behalf.
7. Affidavits-in-opposition have also been filed on behalf of the Allahabad Bank and ICICI Bank. Learned counsel for the respective Bank have also made submissions on behalf of the said two Banks opposing the applicants' prayer for disclaimer.
8. Official Liquidator was represented by Mr. Arunava Sarkar, learned advocate, though, no affidavit-in-opposition has been filed on his behalf. Learned counsel mainly referred to the order passed by the Company Court discharging the Official Liquidator and submitted that in such view of the matter Official Liquidator has no role to play in the matter nor can Official Liquidator disclaim the property in question which is not in his possession nor of which is he entitled to possession.
9. Mr. P.C. Sen, learned senior counsel for the petitioner contended that under the provisions of the companies Act when an order of winding up is passed statutorily the properties vest in the Official Liquidator and, therefore, in terms of the Section 535 of the Companies Act, an application can be made to Court for direction upon the Official Liquidator to disclaim the property and thereby absolve the company in liquidation from its onerous liability. The flat in question, it is contended is used for occupation of its erstwhile Managing Director. No useful purpose would be served, it was contended, by continuing such occupancy when the company has gone in liquidation.
10. Before we consider the submissions made on behalf of the opposite parties it would be proper at this juncture to notice the relevant provision under which the application requires to be considered.
11. The provision for disclaiming the property of a company which is being wound up is to be found in Section 535 of the Companies Act. Under this provision, only onerous property of the company in liquidation can be disclaimed by the Official Liquidator of the company with the leave of Court. Leave has to be taken by the Official Liquidator before he can disclaim the property of the company. Section 535(2), inter alia, provides that the disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest and liabilities of the company and the property of the company in or in respect of the property disclaimed. Instant application is filed by the landlord against the Official Liquidator. Disclaimer is thus prayer for not at the instance of the Official Liquidator under the leave of Court but for a direction upon the Official Liquidator to disclaim the property.
12. The question for consideration is whether such an order can be passed as prayed for. This question needs consideration in the context of the order of Hon'ble the Company Judge dated November 26, 2001 whereby it was directed that "the Official Liquidator shall stand discharged from any liability in respect to take any possession of the assets of the company at the instance of the secured creditors ... ". This is precisely the stand taken by the Official Liquidator in his letter dated February 26, 2003 in reply to the petitioners' Lawyers' letter dated January 31, 2003 and also by his learned counsel before this Court.
13. Mr. P.C. Sen, learned senior advocate, has relied upon an unreported judgment dated March 25, 2003 passed by the learned Company Judge in the matter of the very same respondent Company (in liquidation) wherein one landlord had made a similar application for recovery of possession of the properties. His Lordship, in that case, after noticing that the learned counsel for the secured creditors having submitted that the secured creditors do not have any objection if the property is notionally disclaimed by the Official Liquidator passed the following order;
"In my view, since the Official Liquidator has already been discharged from acting, question of order of physical disclaimer does not arise. However, since the property in question does not belong to the Company in liquidation and the secured creditors do not object to such notional disclaimer, there would be an order of disclaimer of the subject property in question in favour of the application. The applicant would be at liberty to take appropriate steps for protection of its interest in accordance with law."
14. From the above order it will appear that distinction was drawn as to the physical disclaimer and notional disclaimer but the direction of Court was to the effect that "there would be an order of disclaimer of the subject property ... ".
15. No doubt as contended by Mr. P.C. Sen that the property (flat in question) does not belong to the company (in liquidation) as it is only a lessee thereof nevertheless, it cannot be disputed that even the leasehold interest is an asset of the company (in liquidation),
16. Mr. Talukdar, learned advocate on behalf of the intervener (Mr. Shiv Shankar Pasari) referred to the affidavit-in-opposition of his client whereby the above prayers for disclaimer have been resisted on several grounds. It is stated therein that the applicants were requested to transfer the tenancy in respect of the flat in question in the personal name of the deponent inasmuch as he is residing there and it was assured that the applicants would allow him to reside in the flat and that a fresh lease would be executed in his favour after the lease in favour of the company (in liquidation) expires on December 31, 2005. In support thereof, reliance was placed upon certain pay orders evidencing payment of rents.
17. In the affidavit-in-reply apart from denying the above allegations, the payments made by Mr. Pasari by Pay Order as also the debit vouchers, xerox copies thereof, have been filed as annexure 'A' and the submissions made by the applicants herein is that the vouchers were raised in the name of the company now in liquidation. It is contended by Mr. P.C. Sen, learned senior counsel that such act of the intervener is a fraud, as he could not have represented the company after it had gone into liquidation. True as contended by Mr. P.C. Sen, learned senior counsel once an order of winding up is passed, the company in liquidation can be represented only by the official liquidator. I am inclined to agree with Mr. P.C. Sen, learned senior counsel that the petitioners were thereby kept in dark as to the passing of winding up order as rents were tendered on vouchers prepared on behalf of the company without disclosing that the same has gone in liquidation. On this ground the delay in filing the application for disclaimer is liable to be condoned.
18. It is not disputed by the intervener Mr. Pasari in his affidavit-in-opposition that he was allowed by the company to occupy the flat for his residential purposes. It is his case that the lease would expire in December, 2005. His contention is that as he has advanced huge amounts to the respondent company (in liquidation) he is entitled to stay in the flat even if he ceases to have any interest in the company. I cannot in these proceedings adjudicate upon the question as to whether monies are owing to its erstwhile Director by the company (in liquidation). Even if that be the case, he will have to prove the same in accordance with law and rank like others as a creditor.
19. Next, it was contended that he is willing to pay rent in respect of the flat in question in terms of the lease deed being annexure 'A' and, therefore, there is no reason why the property should be disclaimed. The said contention is misconceived. The intervenor can claim no interest in presenti in the assets of the Company (in liquidation). The leasehold interest vests in the company (in liquidation). The question whether the said leasehold interest is liable to be disclaimed or not alone needs to be considered in the instant application. As this question has also been raised on behalf of the other intervenors-Banks, it will be considered a little later.
20. It is not necessary to consider the other self contradictory contentions raised by the intervenor (Mr. Shiv Shankar Pasari). They are stated hereunder only to be rejected.
21. That the property in question should not be disclaimed, inasmuch as, it is a valuable property and the same is not at all an onerous and burdensome property, it is contended that the leasehold right in respect of the flat in question can be sold. In the same breath, it is contended that the applicants herein are under obligation to allow the intervener to enter into a lease deed with him in respect of the flat in question after December 31, 2005. Also, it is being contended that neither the Official Liquidator took possession of the flat in question nor even the Receiver/s appointed by the learned Tribunal and by the Recovery Officer in the recovery proceedings initiated by the respondent Banks and that the intervenor (Mr. Pasari) is entitled to retain possession. Mr. Talukdar, learned advocate, submitted that only symbolic possession can be taken and not actual possession from his client.
22. Now as regards the objections taken on behalf of the ICICI Bank in their affidavit affirmed by their assistant General Manager it is stated that ICICI and UTI along with Life Insurance Corporation of India have initiated proceedings against the respondent company before the learned Debt Recovery Tribunal for recovery of their debts and a Receiver has been appointed by the learned Tribunal.
23. Similar is the case stated on behalf of the Allahabad Bank in the affidavit affirmed by the Manager (Law) of Allahabad Bank. It is the case of Allahabad Bank that recovery proceedings have been initiated pursuant to a certificate for realisation of over Rs. 6 crores from the respondent company and the properties and assets mortgaged and hypothecated with the bank are to remain charged till realisation of the debt. Reference has been made to the orders passed by the Recovery Officer more particularly to the order dated January 5, 2000 being annexure 'B' whereby a Receiver was appointed.
24. It was thereupon contended by the learned respective counsel appearing for the said Banks that the learned Debt Recovery Tribunal and the Recovery Officer are seized of the matter and, therefore, the application is not maintainable.
25. I cannot accede to the above contention. The learned Tribunal is seized of the proceedings for debts due to the bank and not with respect to the winding up proceedings or actions which can be initiated under the Companies Act in winding up proceedings.
26. No doubt as contended by the respective learned counsel for the Banks, Receiver has been appointed both by the learned Tribunal as also by the Recovery Officer in the respective proceedings. Such Receiver has been appointed for realisation of debts over the properties and assets of the certificate debtor company, which have been hypothecated/mortgaged to the certificate holder bank as mentioned in the schedule of annexures to , the petition. This is evident from the prayer recorded in the order of the Recovery Officer dated January 5, 2000 annexure 'B'. Likewise, in the order dated August 26, 2002 passed by the learned Tribunal, it will be seen that the learned Receiver P.C. Ghosh has been appointed to take possession of the assets of the Company. There is no mention of the flat in question or the leasehold interest in respect thereof nor any directions appear to have been passed by either of the said learned authorities appointing Receiver to take possession of the flat or the leasehold interest. It is evident from the statements made at the Bar that the learned Receiver respectively appointed in the two several said proceedings have not taken any steps for possession of the said leasehold interest of the company in liquidation viz., the flat in question which is in occupation of the intervener Mr. Pasari.
27. It is, however, not disputed on behalf of the Banks that the flat in question is not a secured asset nor that the same belongs to the Company (in liquidation). There does not appear to be any dispute that the Company (in liquidation) was only a lessee in respect of the flat in question. Also, in the instant proceedings we are concerned only with respect to the disclaiming of the leasehold interest.
28. Reverting now to the question whether a direction can be issued for disclaimer of the leasehold interest as prayed for in respect of the property in question.
29. As regards the objection taken by the various parties to this proceedings including the Official Liquidator that as the Official Liquidator has been discharged, question of disclaimer by him or direction upon Official Liquidator to disclaim does not arise. Suffice it to state here that once an order of winding up has been made in terms of Section 449 of the Companies Act, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.
30. In terms of Section 451 of the Act, the Liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose. The powers of Liquidator have been enumerated in Section 457 of the Act.
31. As noticed supra, power to disclaim is conferred upon the Liquidator under Section 535 of the Act. Such power is notwithstanding that the Liquidator of the company has endeavoured to sell or has taken over possession of the property. In other words, the discretion to disclaim is notwithstanding the fact that the Liquidator has not taken possession of the property. Once the property is an asset, in the case on hand, leasehold asset, it is not necessary that the Official Liquidator should be in actual possession.
32. The order of Court dated February 26, 2003 discharging the Official Liquidator is, in my respectful view, limited in extent. Official Liquidator, by the said order, stands discharged from any liability in respect of taking possession of the assets of the company at the instance of the secured creditors. The order of discharge is thus not of a general nature absolving the Official Liquidator from all statutory obligations. Neither winding up order has been recalled and the same is operative and subsisting nor the Official Liquidator is discharged from performing his other statutory obligations which by virtue of his office he is required to perform as the Liquidator of the Company (section 499). For the said reasons it cannot be said that the instant application is not maintainable. Objection as to maintainability on the said ground is accordingly rejected.
33. Whether leave should be granted to disclaim the property at the instance of the Liquidator or a direction upon the Liquidator to disclaim at the instance of any other person, the primary concern of the Company Judge is to see whether the property is needed for efficiently carrying on winding up proceedings. If the same is not required for carrying on winding up proceedings, then in my view, only course open to the Court is to direct the Official Liquidator to disclaim the property and save recurring liability of the company in liquidation.
34. Judged in the light of the above, it must be held that the leasehold interest in the property in question is not needed for efficiently carrying on winding up proceedings. Even the said leasehold interest expires in December, 2005. This is apart from the fact that the occupier of the flat in question is claiming occupancy rights. Whereas, according to the petitioner herein, there is no saleable interest as in terms of Clause IV(c) of the lease the lease itself ceases and determines on the tenant going in liquidation. For all the aforesaid reasons the said asset, in my view, is of no use to the company (in liquidation). Undoubtedly, as long as the leasehold interest is not disclaimed, the liability of the company in liquidation to pay rents is of recurring nature. Therefore, the only course open to the Court is to direct the Official Liquidator to disclaim the said leasehold interest in favour of the landlord and save the company (in liquidation) from recurring liability to pay the rent. It is accordingly so directed.
35. As regards the prayer for delivery of possession of the flat in question is concerned, in my view, there can be no direction to the Official Liquidator to deliver the same to the landlords as he can at best be said to be in deemed possession of the same whereas the actual possession is with the intervenor. As noticed supra, leasehold interest being an asset of the company possession thereof can be taken only in accordance with due process of the law. It is, therefore, clarified that the petitioners shall not dispossess the present occupant or take possession of the flat in question except by due process of law.
36. With the directions and observations as above, the application stands allowed in terms as above with costs quantified at 450 GMs payable equally by the three opposing parties hereto.
Xerox signed copy of this judgment countersigned by the Assistant Registrar of this Court be made available to the appearing parties on usual undertaking.