Delhi High Court
Varinder Sahni vs Mgrm Net Ltd. on 30 April, 2009
Author: Gita Mittal
Bench: Gita Mittal
IN THE HIGH COURT OF DELHI
Company Petition No. 164/2008
Date of decision: 30th April, 2009
Varinder Sahni ... Petitioner
through: Mr. Pravir Jain, Advocate
VERSUS
MGRM Net Ltd. ....Respondent
through: Mr. B. Ghosal, Advocate CORAM:
HON'BLE MS. JUSTICE GITA MITTAL
1. Whether reporters of local papers may be allowed to see the Judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes GITA MITTAL, J
1. This petition under section 433 (e) of the Companies Act, 1956 raises an interesting question of law and facts. The petitioner is admittedly the owner, landlord of the premises bearing no.C-6/6, Safdarjung Development Area, New Delhi-16 comprising of a basement, ground floor, mezzanine, first floor, second floor and third floor. A registered lease deed dated 1st April, 2003 was executed between the parties whereby the respondent company took the entire premises on rent for an initial period of three years commencing from 1st April, 2003 to 31st March, 2006 with the option to the respondent company under clause 1.1 to extend the lease for two more terms of three years each on the same terms and conditions. The parties had agreed that a fresh lease deed shall be 1 executed by the parties on the expiry of the period of 36 months from the date of the agreement. So far as rental was concerned clause 2.1 of the lease deed set out the following rent schedule :
"2.1 The LESSEE shall pay to the LESSOR the quarterly rent on the following basis : a. First 12 months Rs.5,00,000/- (Rupees five lakhs) per month.
b. Subsequent 12 months after lapse of (a) above, an increase of 3% on the amount paid under (a).
c. For subsequent 12 months after the lapse of
first 24 months an increase of 6% on the rent
payable under (a) above.
d. In the event of the LESSEE extending the
Lease, the rent payable for the subsequent 36
months shall be as under:
(i) For the first 12 months an increase of 10% over the base rent payable under (a) above.
(ii) For the subsequent 12 months after lapse of (i) above, an increase of 13% on the rent payable under
(a) above.
(iii) For the subsequent 12 months, an increase of 16% on the rent payable under (a) above."
2. The recitals in lease deed stated that the respondent company was desirous of taking on lease the premises for its offices for carrying out the company's business of rendering multiple domain services using technology etc. The respondents have set up a case that the petitioner had represented that the premises could be used for such purpose. The respondent has further urged that with the knowledge, permission and approval of the petitioner, they caused construction, improvement, upgradation and furnishing of the suit premises to carry on their business. An expenditure of Rs.47,01,528/- is stated to have been incurred for installation of UPS, EPABX, air-conditioning units and panels while Rs.49,189/- 2 stated to have been incurred on installation of fire extinguishers. In addition, the respondent claims that electricity meters were changed and loads enhanced at an expenditure of Rs.53,955/- for which the petitioner is stated to have issued a certificate. The respondent has submitted that it has made a security deposit of Rs.2,62,500/- to the BSES, Rajdhani for installation of a transformer. A further payment of Rs.11,33,435/- was made as cost of the transformer while Rs.3,92,000/- was deposited for enhancement of the electricity load. The respondent have claimed that they awarded a contract for restoration work to M/s Ahluwalia Contracts India Ltd. for a sum of Rs.97,90,797/- and fixtures were done for a sum of Rs.34,32,234/-
It is an admitted position that the respondent was carrying on its business from the subject premises.
3. Inasmuch as the lease was to expire on 31st March, 2006, the respondent sent a letter dated 9th January, 2006 to the petitioner exercising its option of renewal thereof. The petitioner sent a reply dated 8th March, 2006 confirming that the respondent had maintained financial discipline and paid rent in advance on quarterly basis. However urging that as there was an upward trend in the Indian economy and the business scenario resulting in overall increase in rental values, the petitioner called upon the respondent to make a 30% increase in the rent and pay stamp duty accordingly to register the lease deed.
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4. The respondent objected to this demand for enhancement by a letter dated 17th March, 2006 drawing the attention of the petitioner to the terms of the lease.
An impasse resulted. However the respondent voluntarily paid the enhanced rent between the period 1st April, 2006 to 30th September, 2006 which was duly accepted by the petitioner.
5. Learned counsel for the respondent has drawn my attention to a letter dated 17th April, 2006 received from the petitioner wherein for the first time it was stated that the Supreme Court directives did not permit the respondent to misuse residential property for business purposes and called upon the respondent to vacate the premises. It is contended by Mr. R. Ghosal, learned counsel for the respondent that with effect from the middle of April, 2006, the respondent stopped using the premises. It is urged that notices from the Municipal Corporation of Delhi in this behalf also appeared in the newspapers threatening sealing of properties and prosecution of occupants who were misusing the residential properties.
6. It appears that in the meantime the petitioner had a change of heart and he addressed a communication dated 10th February, 2007 to the respondent now informing it that the petitioner has been ready and willing to execute the fresh lease deed at the increase of 15% on the last paid rent in terms of the agreement dated 1 st April, 2003 between the parties. The respondent was called upon to 4 make payment of arrears at such rate with effect from 1 st October, 2006 up to 31st March, 2007. The petitioner also called upon the respondent to finalise the draft of the lease agreement. The respondent was notified that the renewal of the rent agreement for the premises shall be in accordance with the terms and conditions laid down by the concerned authorities with regard to the user of the property in question.
7. A notice dated 16th April, 2007 followed setting out the account position with regard to payment of the rent in detail and called upon the respondent to get the formal lease deed executed and registered. The respondent was called upon to pay the arrears of rent at the increased rate of Rs.5,50,000/- per month for the period 1st April, 2006 to 31st March, 2007 with interest at the rate of 18% per annum and to use the leased premises in conformity with the terms and conditions imposed by the authorities.
No reply was sent nor any steps taken by the respondent to either clear the arrears or to execute the lease deed.
8. As a result, the petitioner filed a civil suit on 24th May, 2007 on the original side of this court being CS(OS) No. 983/2007 praying for a decree of specific performance inter alia making the following prayer :-
"A. Pass a decree for specific performance in favour of the plaintiff and against the defendants thereby directing the defendants to execute a fresh lease deed in respect of property in question i.e. property bearing no. C-6/6, Safdarjung Development Area, New Delhi-110016, more specifically shown in RED in 5 the site plan attached for a period of three years with effect from 01.04.2006 in accordance with the terms and conditions as agreed vide registered lease deed dated 01.04.2003 and get the same registered inasmuch as the defendants have already exercised their option for renewal of lease."
9. In the meantime, it appears that certain action was taken by the Municipal Corporation of Delhi as part of the general drive against misuser of residential properties in Delhi. The respondent has contended that on 7th July, 2007, the subject property was sealed by the MCD.
A request of the respondent to the MCD and the Monitoring Committee appointed by the Apex Court resulted in an order dated 10th July, 2007 of temporary desealing of the property for 20 days. This desealing was extended subsequently and by a communication dated 24th September, 2007, the Municipal Corporation of Delhi informed the respondent that desealing of the premises for residential use stood permitted. The respondent was further notified that mixed land use/commercial activity in the premises was permissible with the permission of the Municipal Corporation of Delhi after registration etc. in terms of para 15.9 of the MPD-2021.
It is noteworthy that these documents have been placed by the respondent on record alongwith its reply.
10. The petitioner filed a written statement and counter claim to CS(OS) No. 983/2007 opposing the suit prayer and inter alia contending that the premises had been let out to the respondent 6 for the purposes of its office. By way of the counter claim, the respondent also claimed refund of Rs.70,92,000/- on account of security deposit and rent from March, 2006 to September, 2006 with interest at the rate of 18%. So far as the compensation for relocating is concerned, the respondent claimed Rs.20 lakhs for the same and an amount of Rs.50 crores each towards loss of future clients and goodwill. The respondent also prayed for a declaration that it was not liable to pay rent to the petitioner for the suit premises since April, 2006 when the petitioner had sent a letter dated 17th April, 2006 informing the respondent about the Supreme Court directives.
This stand and counter claim is the defence of the respondent to the present winding up petition as well.
11. My attention is drawn to an application being IA No. 13163/2007 filed by the respondent in the CS(OS) No. 983/2007 praying for being permitted to sue as an indigent person of Rule 1 of Order 33 of the Code of Civil Procedure. No court fee has been paid by the respondent on its counter claim.
12. The petitioner contends that the respondent failed to discharge its admitted liability and further in the light of the pleas taken in IA No. 13163/2007, had admitted its inability to pay the court fees.
13. In these circumstances, the petitioner states that it was left with no option but to send a legal notice dated 31st October, 2007 7 informing the respondent that it had failed to clear the arrears of rent despite repeated requests, demands and the legal notice dated 16th April, 2007. The respondent was also informed that after expiry of the term of three years 31st March, 2006 of the lease deed dated 1st April, 2003 on the respondent company was a month to month tenant in accordance with law. The petitioner notified the respondent of the termination of its tenancy with effect from the midnight of 30th November, 2007 and called upon the respondent to hand over vacant and peaceful possession of the entire premises as well as to clear the arrears of rent for the period 1st October, 2006 to 31st October, 2007 at the rate of Rs.5,50,000/- per month amounting to a total of Rs.70,80,000/- with interest at the rate of 18% per annum till realisation. The respondent was notified that upon the failure of the respondent to meet the notice demand, the petitioner would be entitled to damages for use and occupation at the current market rate which was stated to be more than Rs.16 lakhs per month with effect from 1st December, 2007.
14. Before this court, a dispute is raised by the petitioner that such notice was not received by it. On the other hand, the petitioner has placed copies of the UPC and the postal receipts of registration and dispatch as well as photocopy of the receipted acknowledgment due card to establish service. Mr. Pravir Jain, learned counsel for the petitioner has also placed before this court a copy of a letter dated 7th March, 2008 issued by the Department 8 of Posts confirming that the notice sent by transaction no. 1621 on 2nd November, 2007 from the post office at the district courts stood delivered on 3rd November, 2007 to the addressee. Inasmuch the issue with regard to service of this notice does not arise for adjudication before this court, I refrain from making any observation with regard to the service of the notice upon the respondent. However, prima facie, the petitioner appears to have established dispatch and receipt of the notice to and by the respondent.
As the respondent still did not pay the arrears of rent and mesne profits despite the service of the notice, the petitioner proceeded further in the matter.
15. As a result of the counter claim filed by the respondent and the notice dated 3rd May, 2008, the petitioner is stated to have withdrawn its prayer for specific performance and direction to the respondents to the execute of the registered deed in CS(OS) No. 983/2007.
16. On 8th May, 2008, the petitioner proceeded to file a second suit bearing CS(OS) No. 1079/2008 praying for eviction of the respondent, arrears of rent and mesne profits in terms of the notice dated 31st October, 2007.
17. Learned counsel for the petitioner has drawn my attention also to a legal notice dated 11th March, 2008 sent to the respondent under the provisions of 433, 434 and 439 of the Companies Act, 9 1956 calling upon the petitioner to pay the charges for use and occupation of the property. Apart from the receipted acknowledgment due cards, the petitioner has again placed before this court copies of the certificates dated 1st May, 2008 and 8th May, 2008 issued by the postal authorities confirming that all the notices stood delivered to the addressee.
The respondent failed to even respond to this notice. The present petition seeking winding up has been filed in this factual background.
18. As noticed above, the respondent has opposed the present petition raising the same defences as raised in the written statement. It is vehemently urged by Mr. B. Ghosal, learned counsel for the respondent that the respondent has raised a counter claim upon the petitioner and hence it is justified in withholding payment of any amount towards use and occupation charges. A further submission is made that the filing of the counter claim by the respondent shows that there is a bonafide dispute requiring examination by the civil court and for this reason, no order for winding up of the respondent company can be passed. The contention on behalf of the respondent is also that it is entitled to continue to use and occupy the premises in terms of the lease deed and for this reason, the suit as well as the present petition are misconceived and are malafide. Much stress is laid on the nature of activities of the respondent being a company undertaking research 10 activities and its capabilities in support of the contention that the respondent company has acted bonafide. The principal submission is that the petitioner is in breach of the lease deed dated 1st of April, 2003 and has prevented the respondent from using the premises for the purpose for which it was let out and consequently the respondent is justified in not paying the rent to it.
19. Having heard learned counsel at length, certain essential facts which remain undisputed deserve to be set out for purposes of clarity :
(i) A submission has been made by Mr. Ghosal, learned counsel for the respondent before this court that in view of the renewal option under the lease deed dated 1st April, 2003, the respondent is entitled to continue to occupy the premises till 2012. Such submission however fails to take notice of the intervening facts Though the respondent exercised its option of renewal of the lease deed dated 1st April, 2003 but no fresh registered lease deed has come into existence after the expiry of the lease deed on 31st March, 2006. The respondent has opposed the execution of the registered lease deed despite the filing of the first suit CS(OS) No. 983/2007 for the purpose by the petitioner. The respondent contested the prayer and has permitted even the three year extended period to lapse without execution of any further lease deed. Its status, therefore, after 1st April, 2006 was that of a month to month tenant and it certainly cannot go back to the terms of the 11 lease deed dated 1st April, 2003 to claim any rights in respect of the subject property.
(ii) In terms of the lease deed, the respondent was paying the increased rent up to 31st March, 2006. Thereafter further enhanced rent of Rs.5,50,000/- was paid from 1st April, 2006 till 31st September, 2006. No amount whatsoever has been paid to the petitioner thereafter.
(iii) The submission of learned counsel for the respondent that it was prevented from using the premises by the issuance of the communication dated 17th of April, 2006 by the petitioner is not supported by the record. The respondent states that Municipal Corporation of Delhi sealed the premises from 7th July, 2007 till 10th July, 2007. The sealing of the property by the MCD on 7th of July, 2007 would indicate that the respondent was operating therefrom.
There is no explanation as to why no rent was paid from 1st October, 2006 till the sealing on 7th July, 2007.
(iv) So far as the sealing of the premises is concerned, the respondent was informed by the notice dated 10th February, 2007 that renewal of the rent agreement for the premises would be in accordance with terms and conditions laid down by the concerned authorities with regard to the user of the property in question. As per the letter of the MCD dated 24th September, 2007 relied upon by the respondent, it has been informed that mixed land use/commercial activity in the premises was permissible with the 12 permission of the Municipal Corporation of Delhi after registration etc in terms of para 15.9 of the MPD-2021. The Master Plan is a statutory document and binding on all parties. No objection was raised by any authority to the commercial user of the premises till 7th of July, 2007 and even thereafter the manner in which it was permissible stood clarified to the petitioner by the MCD. The respondent has taken no steps whatever to get the requisite registration prescribed by the MCD and for this reason is unable to use the premises commercially.
(v) The respondent did not notify the petitioner about the sealing of 7th July, 2007 or its subsequent desealing. No notice under section 108 (e) of Transfer of Property Act, 1882 was sent to the respondent.
(vi) Clause 7.1 of the lease deed dated 1st April, 2003 dealing with force majeure stipulates that in case the said premises or a substantial part thereof shall at any time during the term be destroyed or damaged by any act of God, riot and civil commotion, enemy action and any acts not within the control of the lessee or if the lessee is unable to gain access to the said premises or a substantial portion of the said premises are uninhabitable, in any such event the lessee shall not be required to pay any rent till such time the said premises are brought to their original condition. In case they are not so brought back to its original condition within 30 days from the date of such damage or destruction, then the 13 respondent is entitled to terminate the lease deed.
Admittedly, no such option was exercised by the respondent at any point of time.
(vii) Between 1st April, 2007 to 7th July, 2007 and after 10th July, 2007, till date, there is no sealing of the premises. Even according to the respondent, it paid rent lastly at the rate of Rs.5,50,000/- The respondent admittedly continues to be in the absolute and exclusive possession of the entire demised premises and it has failed to pay the charges, whether as rent or, after termination of the tenancy, as mesne profits.
20. The present petition seeking winding up of the respondent company has been filed complaining that despite receipt of the statutory notice, the respondent company has failed to pay and/or discharge its admitted liability towards the petitioner on account of rent/mesne profits in respect of the property manifesting that it is unable to pay its debts. Yet another circumstance pointed out by the petitioner is the claim of indigency under the provisions of rule 1 order 33 of the Code of Civil Procedure made by the respondent by way of IA No. 13163/2007 in CS(OS) No. 983/2007 whereby it had sought exemption from payment of further requisite court fee in filing its counter claim. It is urged that the filing of such an application and the pleas therein is a self incriminating admission on the part of the respondent that it is not in a position to pay its admitted debts.
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21. It now becomes necessary to deal with the primary contention of the respondent to the effect that it has filed a counter claim for Rs.1,03,92,85,600/- and consequently is not liable to pay any rent or charges for use and occupation till the respondent makes payment thereof. Vehement submissions have been made that the counter claim of the respondent is justified and bonafide. The same is also urged as an answer to the present petition. Consequently the respondent claims that it has made out a valid and good defence to the present petition.
22. So far as the objection that the petitioning creditor has filed a suit which disentitles it from maintaining a winding up petition is concerned, it is well settled that the right to bring a winding up action is statutorily conferred under Section 433 of the Companies Act, 1956. However, no person has a statutory right to winding up of a company incorporated under the Companies Act, 1956. Action to recover an amounts due and payable by a company and a petition seeking its winding up are two wholly distinct and independent remedies. It is not necessary that every petition under Section 433 of the Companies Act, 1956 ends up in an order of winding up. Several essential factors as public interest, justice and convenience enter into the consideration before the prayed for order results. The nature of the defence and extent of dispute raised by the respondent also impact adjudication in winding up action. At the same time, the limitation for seeking the remedy of 15 recovery against the company continues to run. The two remedies are not alternative remedies. More often than not, as a matter of abundant caution, parties do not wait for final decision in one remedy before invoking the other.
23. I find that a similar issue was raised and decided by this court in a judgment reported at 1998 (45) DRJ 522 Rishi Pal Gupta Vs. S.J. Knitting and Finishing Mills Private Limited. A similar objection taken by the respondent debtor of the company, was rejected holding as follows :-
"It is now well settled law that the remedy of recovery of money through a civil suit is distinct from that of the remedy provided for winding up of a company for non-
payment of its debt under Section 434 of the Companies Act. In the winding up proceedings the final order passed is to wind up the company which is not only beneficial for the petitioner but is also beneficial to all the shareholders, creditors or contributories of the companies. The purpose of filing a recovery suit and a winding up petition are separate and distinct and therefore, even when a civil suit for recovery of a debt is filed, there is no bar for the creditors to file a petition in the Company Court for winding up of the defaulting company. Therefore, in my considered opinion the company petition filed by the petitioner is maintainable."
24. In view of the above, mere filing of the suit by the petitioner in order to protect its right and by way of abundant caution certainly would not prohibit filing of the winding up petition or preclude the petitioner from maintaining the same. 16
It therefore has to be held that filing of a counter claim by itself would not by itself prohibit maintainability of a winding up petition.
25. In the instant case, a counter claim has been raised in a suit filed by the present petitioner. Such counter claim has been filed without payment of court fees and the respondent has failed IA No. 13163/2007 seeking leave to sue as an indigent person. As on date, it is an admitted position that the applicant has not been permitted to as an indigent person and consequently it would not be legally correct for the respondent to contend that its counter claim is pending.
26. Even assuming that the counter claim of the respondent seeking damages was maintainable, the question which arises for consideration is as to whether the respondent can legally hold the property without making payment of any amount towards the use and occupation charges. The counter claim alleges that the petitioner has breached the terms and conditions of the lease deed dated 1st April, 2003. This lease admittedly expired by efflux of time on 1st April, 2006. It would, therefore, not be open for the respondent to utilise the shield of the terms and conditions of this lease deed as binding the petitioner so far as its occupation after 1 st April, 2006 is concerned. There is no order directing attachment of the property on any application filed by the respondent. The respondent has admittedly paid enhanced rent in respect of the 17 property from 1st April, 2006 till 31st September, 2006. It, therefore, has to be held that merely seeking leave to maintain a counter claim as an indigent person would not enable the respondent to continue to occupy the premises without payment of any charges.
In view of the above, mere claiming that it has a counter claim would not by itself disentitle the petitioner from bringing the present petition.
27. Reliance is placed by Mr. Ghosal, learned counsel for the respondent on the pronouncements reported at 2001 (107) Com.Cases 587 QSS Investors Pvt. Ltd. vs. Allied Fibres Ltd.; 1999 (96) Com.Cases 723 Smt. Vijayalakshmi vs. Hari Hara Ginning & Pressing; 1998 (92) Com.Cases 356 Azeet International Pvt. Ltd. v. Himachal Pradesh Horticultural Produce Marketing & Processing Corpn. Ltd.; 2007 (138) Com.Cases 422 Euro Containers v. Morepen Laboratories Ltd. ; 2001 (107) Com.Cases 126 H.Q. Chemicals Ltd. v. Care Formulators Pvt. Ltd. ; 2003 (114) Com.Cases 721 Rediffusion Dentsu, Young & Rubicam P. Ltd. v. Solidaire India Ltd. ; 2005 (127) Com. Cases 66 K.C.P. Ltd. v. Prudential Sugar Corpn. Ltd. ; 1989 (66) Com. Cases 634 State Trading Corpn. of India Ltd. v. Punjab Tanneries Ltd. and 1990 (68) Com. Cases 506 T. Srinivasa v. Flemming (India) Apotheke Pvt. Ltd. in support of its objections that the pendency of the counter claim for adjudication by itself is adequate 18 defence to the prayer made by way of the present petition. There can be no dispute with the legal principles laid down in these precedents.
28. In 1987 (61) Comp. Cases 504 (Cal)(DB) J.N. Roy Chowdhury (Traders) P. Ltd. vs. Jainti Enterprises, the court held that where there are claims and cross claims between the creditors seeking the winding up and the company sought to be wound up. It was, therefore, held that the debt can be said to be bonafide disputed and the court will not order the winding up of the company. The petitioner also relies on 1995 (82) Com.Cases 74 (Kan) Rainbow Enterprises v. India Brewery & Distillery Ltd. to urge that where disputed questions of fact arise, winding up cannot be ordered.
29. In 2001 (103) Com.Cases 863 (All) Shadi Lal Enterprises Ltd. v. Cooperative Co. Ltd. it was held that where complicated facts arise for consideration, they are not to be gone into in a winding up petition. In the light of the above discussion, these pronouncements would have no application to the questions which have been raised before me.
30. In AIR 1994 (Del) 317 M/s Jwala Pershad Ashok Kumar Chopra H.U.F. & Anr. vs. M/s Nath Tubes Pvt. Ltd. & Ors. the court held that in case premises had become incapable of enjoyment, the tenant would be entitled to suspension of rent. There can be no dispute with the proposition laid down. However, 19 no such issue arises before this court as the respondent has not been able to show it was or continues to be prevented from user of the premises. If a statutory Master Plan coming into force requires an application or permission to be obtained, the same would bind all persons. The respondent has failed to show that it has taken any steps in this regard. In any case, as noticed above, no notice under section 108(e) has been issued.
31. Mr. Ghosal, learned counsel for the respondent submits that it has raised a dispute even before the notice of admission had been issued. Placing reliance on 1995 (82) Com. Cases 74 Rainbow Enterprises v. India Brewery & Distillery Ltd. It is argued that in this background, the present petition is fully misconceived.
So far as the dispute which has been raised in the present proceedings by the respondent is concerned, I have found that the same would not justify withholding of the charges for the use and occupation. In any case, the discussion shows that the respondent has withheld rent for the period prior to July, 2007 as well for which there was no dispute at all. The respondent has opposed execution and registration of a lease deed without any justification as well. In this background, the principles laid down by the court in this precedent have no application in the facts and circumstances of the instant case.
32. So far as the purpose for which the premises were taken on rent is concerned, I find that though the recitals in the lease deed 20 dated 1st of April, 2003 record that the respondent wants to take the premises to run its office, however there is no statement of purpose in the body of the document as to the purpose for which the premises were being given on rent. There is also no statement by the petitioner in the lease that the tenancy has been created for commercial user by the respondent.
33. Both parties placed reliance on copies of site plans which are stated to be signed by both parties. These plans are undated. However it is noteworthy that so far as the floor plan of the first, second, third floor are concerned, the constructed portions are described as family lounge, sitting rooms, bed rooms, kitchen, toilet etc. They are not described as premises intended for a commercial user.
Mr. Pravir Jain, learned counsel appearing for the plaintiff has submitted that the commercial user of the ground floor portion has always been permitted.
34. So far as the legal position is concerned the letter of the MCD of September, 2007 sets out the same. Learned counsel for the respondent has urged at length that it had carried out extensive and expensive alterations and additions to the premises to make it suitable for use for its office purposes with the consent of the petitioner. Reliance is placed on clause 3.2 of the lease which records the confirmation of the lessor that they have complied with and shall continue to comply with all applicable rules and 21 regulations. This aspect would not make the position very different. Firstly, the very fact that extensive changes were required indicates that the tenant knowingly converted residential premises into commercial/official premises. This is manifested from the site plans. Secondly, even assuming that the premises were let out for the purposes of running of the office, admittedly the same was not interdicted by any act on the part of either the petitioner or the Municipal Corporation of Delhi till the lease came to an end on 31st March, 2006. Thirdly, there can be no estoppel against a legal requirement.
35. Even after the premises were sealed, the respondent did not notice the petitioner in accordance with the provisions of sub- section (e) of Section 108 of the Transfer of Property Act to void the lease. In 58 (1995) DLT 799 Chander Mohan Jain & Ors. v. State Bank of Patiala, it was held by this court that so long as the lease had not been voided, the defendant bank was liable to pay rent. The defendant bank had contested a rental claim on the ground that part of the roof had collapsed and the building was sealed by the NDMC. In these facts, it was held by the court that if the defendant/tenant was so minded, it had the option of voiding the lease and it had not been so. The court held that so long as the lesse has not been voided, the defendant bank continued to regard itself as a tenant and it is liable to pay the rent.
The position in the instant case is on all fours with the position 22 before the court in this precedent.
36. Again in yet another pronouncement reported at 1973 (2) ILR (Del) 540 being in SAO 30/1969 Chamber of Colour & Chemicals P. Ltd. v. Trilok Chand Jain, this court had held that the tenant cannot treat a lease as subsisting and suspend payment of rent. In the light of these well settled principles of law, certainly in the given facts, the respondent cannot withhold payment of the charges for the use and occupation by it.
37. The respondent places reliance on the pronouncement reported at 2001 (103) Com.Cases 863 (All) Shadi Lal Enterprises Ltd. v. Cooperative Co. Ltd. in support of its plea that where complicated allegations and counter allegations requiring trial arise, a winding up petition would not be the appropriate remedy. There can be no dispute at all with this well settled principle.
38. It is however equally well settled that so far as the consideration of a petition under section 433 of the Companies Act is concerned, the court is not concerned with the quantification of the arrears but with the existence of the debt. In the instant case, admittedly the petitioner is liable to make payment of charges towards rent till its termination and charges for use and occupation which it has failed to do so. The petitioner has also failed to comply with the notice for eviction of the subject premises or with the prayer for arrears of rent/mesne profits made in the suit for 23 eviction. There is, therefore, no dispute at all so far as existence of the debt is concerned.
39. An important question arises based on the pleas of the respondent in IA No. 13163/2007 in CS(OS) No. 983/2007. In this application filed under the provisions of Rule 1 of Order 33, the respondent has given details of its financial condition and inability to pay court fee which can be summed up thus :-
(i) At the stage when the process from research to commercialisation of the development work undertaken by the respondent was going on to fructify, the suit premises were declared as not permitted to be used for office purposes.
(ii) The bulk of the company's assets as on the end of last financial year 2006-2007 were in the state of capital work in progress pending commencement of commercial operation while the balance were assets which included fitting and furniture etc which furnished the subject premises.
(iii) The company is yet to start commercial operation and does not have any regular source of income; does not draw any profit and loss account as reflected in the balance sheet.
(iv) Company's cash and bank balance as on 31st March was only Rs.14,07,012.12 as against pending share money of Rs.35 lakhs.
The company has taken further advance share money/amounts from various source to meet its day to day requirements including salaries of employees. Its balance sheet signifies its weak and tight liquidation process.
(v) The nature and business of the company is of a long term nature and the research and resultant IPR cannot be encashed.
(vi) The respondent was not capable to raise funds to pay the required court fee for the counter claim.
On these facts, the applicant sought leave to sue as an 24 indigent person.
40. The entire defence of the respondent to the present winding up petition rests on the presumption that it is bound to succeed to the full extent of its counter claim. No answer could be given by learned counsel for the respondent to the question as to what would be the position in case its IA No. 13163/2007 was dismissed. There is certainly no answer to the query as to where would the respondent stand if its counter claim was rejected. No relief with regard to suspension of rent has been sought in any legal proceedings.
41. In this background, I find that admittedly, the respondent is in arrears of rent as well as use and occupation charges. Despite the service of the notice dated 11th March, 2008, the respondent has failed to make payment of the same. Assuming that the counter claim raises a valid claim upon the petitioner, the same does not relate to the period in respect of which the entire arrears have been claimed in the notice. Admittedly, at best, the respondent was prevented from user of the premises for the three day period between the 7th of July, 2008 till its desealing on 10th of July, 2008.
42. There is yet another circumstance which deserves to be notice. The petitioner herein has filed an application being IA No. 7846/2007 in CS(OS) No. 983/2007 seeking arrears of rent. This application came up for consideration on several dates before the court. Mr. Jain, learned counsel for the petitioner submits that this 25 IA No. 7846/2007 in CS(OS) No. 983/2007 was withdrawn on 6th November, 2008 as other legal steps stood taken.
43. On the 19th November, 2007 the court observed that as on the date of passing of the order, the liability of the respondent towards occupation of the premises even at the rate of Rs.5,50,000/- had risen to the tune of Rs.60 lakhs. The court observed that it was strange that if the respondent had become an indigent as claimed in the application by it, how it could meet its liability for the occupation of the premises. Learned counsel for the respondent had taken an adjournment to take instructions from his client whether they are ready to vacate the suit premises or to pay the last admitted rent. This matter remains pending till date.
44. In this background, the facts pleaded by the respondent in IA No.13163/2007 would show that the respondent is not in a position to make payment of its debts. It has failed to pay the same. The respondent has failed to comply with the legal requirements for withholding rent under section 108(e) of the Transfer of Property Act. Despite service of the statutory notice under section 433 and 434 of the Companies Act, the respondent has also failed to make the payment to the petitioner. If the respondent was proceeding bonafide in the matter, nothing precluded it from seeking appropriate directions for deposit of the rent/charges for use and occupation in the court and appropriate directions for their appropriation. On the contrary, the record would show that the 26 respondent has opposed every bonafide and lgal attempt by the petitioner.
45. In the light of the above discussion, the present case is therefore a fit case for admission of the petition.
The petition is ordered to be admitted. Let notice of publication of the petition be effected by the petitioner in the "Statesman" (English edition) and "Jansatta" (Hindi edition) in accordance with Company (Court) Rules, 1959. The Official Liquidator attached to this court is appointed as the provisional liquidator of the company with a direction to take over all assets and records of the company wheresoever located and to proceed in the matter in accordance with law. The Official Liquidator shall file its report within two months of taking over possession of assets and records of the company.
46. There is yet another aspect to the matter. The stand misguidedly adopted by the respondent is both unreasonable and unfair. However having regard to the nature of its activities as propounded by learned counsel and evident from the memorandum and articles of association of the respondent, I would still like to give one opportunity to the parties to amicably resolve all issues arising in this case. For this purpose, I direct that publication of the citation and appointment of the provisional liquidator shall stand postponed by a period of four weeks from today.
In the meantime, if it is so inclined the respondent may, within 27 four weeks from today, approach the petitioner as well as the Delhi High Court Mediation Centre with a written request for mediation on the disputes between the parties. The petitioner has consented to resolution of disputes by mediation on an earlier occasion and it is presumed by me that the same willingness is still present. If so approached, the Delhi High Court Mediation Centre shall mediate between the parties by virtue of the order passed today. Communication of notice of the date and time of the proceedings to be conducted by the Delhi High Court Mediation Centre to learned counsel for the parties shall be deemed adequate notice to parties.
47. In case the respondent does not communicate with the petitioner and the Delhi High Court Mediation Centre in terms of the liberty granted herein, it shall be open for the petitioner to proceed with the publication of the citation within the period granted and the Official Liquidator shall proceed with the liquidation proceedings.
48. In case the petitioner is not inclined to make an attempt for dispute resolution by mediation, it shall file an appropriate application informing this court of its unwillingness and to take appropriate steps to effectuate the publication of the citations as ordered on expiry of a period of four weeks.
49. In case the parties arrive at an amicable settlement, then subject to and upon compliance with the terms of settlement, the order of admission of the petition and appointment of the 28 provisional liquidator shall stand withdrawn.
50. It is made clear that no adverse inference shall follow in case either of or both the parties are not inclined to seek dispute resolution by mediation and this option shall be based purely on the consent and willingness of the parties.
List for further directions on 9th July, 2009.
(GITA MITTAL) JUDGE April 30, 2009 kr 29