Gujarat High Court
Desai Vishnubhai Fulabhai & 5 vs O.L. Of Arbuda Mills (Under ... on 11 March, 2015
Author: Ks Jhaveri
Bench: Ks Jhaveri, A.G.Uraizee
O/OJA/50/2005 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
O.J.APPEAL NO. 50 of 2005
In COMPANY APPLICATION NO. 121 of 2005
In COMPANY PETITION NO. 86 of 1995
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE A.G.URAIZEE
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India or any order
made thereunder ?
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DESAI VISHNUBHAI FULABHAI & 5....Appellant(s)
Versus
O.L. OF ARBUDA MILLS (UNDER LIQUIDATION) & 1....Opponent(s)
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Appearance:
MR HM PARIKH, ADVOCATE for the Appellant(s) No. 1 , 3
MR SATYAM Y CHHAYA, ADVOCATE for the Appellant(s) No. 1.1 - 1.5 , 2 ,
3.1 - 3.3 , 4 - 6
MR RM DESAI, ADVOCATE for the Opponent(s) No. 1
MR SN SHELAT, SENIOR ADVOCATE WITH MRS VD NANAVATI,
ADVOCATE for the Opponent(s) No. 2
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Page 1 of 13
O/OJA/50/2005 JUDGMENT
CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE A.G.URAIZEE
Date : 11/03/2015
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI)
1. The appellants being aggrieved by the judgement and order dated 09.05.2005 passed by the learned Company Judge in Company Application No. 121 of 2005 has preferred the present appeal.
2. Mr. S.N. Shelat, learned Senior Counsel appearing with Mrs. V.D. Nanavati, learned advocate for the respondent submitted that the issue involved in this appeal is squarely covered by a decision of the Apex Court in the case of Jabal C. Lashkari V/s O.L. of Prasad Mills Limited and others reported in 2008(3) G.L.H. 528 and therefore this Court may not interfere in the present matter as the impugned order passed by the learned Company Judge is just and proper.
3. Mr. Satyam Chhaya, learned advocate appearing for the appellants submitted that the predecessors-in-title of the appellants (Original applicants) had purchased the subject property vide registered sale deed dated 24/7/1934 and that at that time subject property was leased to M/s Lalbhai Trikamlal Mills Limited (LATER ON RENAMED AS Arbuda Mills Limited ) in the year 1929 vide registered lease deed dated 13/7/1929 for a rent of Rs.3,653/-. He submitted that as per said lease deed, lease is perpetual. Relevant clauses of Page 2 of 13 O/OJA/50/2005 JUDGMENT the said lease deed are -
Clause-3 which provides that if lessee fails to pay rent regularly or if any condition of lease is breached, lessor is entitled to take possession of the subject property. (Forfeiture clause) Clause-10 which provides for right of lessee to transfer the tenancy and Clause-11 which provides that in case of any acquisition of subject property under Land Acquisition Act or any other Acts, appellant-lessor will be entitled to compensation or sale price thereof and shall not be disputed by the lessee.
3.1 He submitted that the lease deed does not speak of payment of any premium to the lessor. In other words, payment of rent of Rs.3,653/- was not a nominal or token rent.
3.2 Mr. Chhaya further submitted that aforesaid lease was terminated vide notice dated 24/12/1973 alleging breach of the terms of the lease. The appellants' ancestors filed HRP suit No. 1200 of 1975 in the Small Causes Court at Ahmedabad for possession. Compromises were recorded in the said suit as per which rent was revised with apportionment amongst co-owners against waiver of breach of terms of lease. The Company Court vide its order dated 12/7/1995 ordered the said lessee company to be wound up. No rent has been paid after 1994. Some of the co-owners had called upon Official Liquidator to pay rent for the year 1995. However, the Official Liquidator did not pay the rent.
Page 3 of 13O/OJA/50/2005 JUDGMENT 3.3 Mr. Chhaya further submitted that the appellants took
out Judges' Summons by way of Company Application No.121 of 2005 praying inter alia (i) directing O/L to hand over vacant and peaceful possession of the lands bearing survey NOs.405 and 408 situated in the sim of village Rakhial, Taluka Daskroi, District Ahmedabad (2) to direct O/L to make payment of arrears of the rent due and (iii) pending admission, hearing and till final disposal to direct O/L not to alienate subject property. The appellants contended that Company in liquidation was a statutory tenant in view of termination of lease and filing of HRP Suit in the Small Causes Court as stated hereinabove and therefore in view of provisions of section 15 of the Bombay Rent Act, Official Liquidator had no authority to sell the subject property. The said application came to be dismissed by the learned Company Judge vide impugned order holding that (i) in view of plaintiffs having given up their objections with regard to the breach of terms of the lease deed and that the company in liquidation was well within its rights to create charge or mortgage such property with the lenders, the lenders have every right to enforce their security for the purpose of recovery of their dues and further holding that judgments relied upon by applicants were not applicable in as much as lessee was not a statutory tenant.
3.3 Mr. Chhaya submitted that the learned Company Court further directed Official Liquidator to ascertain as to whether the applicants are the legal heirs and successors and thereby they are the real claimants and if there is any dispute with regard to the claim of payment of rent, Official Liquidator was directed to report before the Hon'ble Company Court and seek appropriate direction in this regard. The Official Page 4 of 13 O/OJA/50/2005 JUDGMENT Liquidator was further directed to pay rent till sale is confirmed and thereafter it will be liability of the auctioned purchaser to pay the liability of rent of such lands.
3.4 Mr. Chhaya submitted that the appellants preferred present O.J. Appeal NO.50 of 2005 against the said order rejecting Company Application no.1201 of 2005. The Official Liquidator has executed sale deed. As per the document of sale deed, it is purported to have been executed on 4 th June, 2005 whereas it appears to have been registered in the year 2013 which is legally not permissible. Moreover, as per the terms of sale deed, subject property is shown as free-hold property and not as leasehold property without payment of reversnary interest in subject property. The appellants have filed O.J. C.A. NO.601 of 2013 for setting aside the sale deed.
3.5 Mr. Chhaya submitted that so far as the decision of this Court in the case of Legal Heirs of Deceased Fakir Chand Ambaram Patel V/s OL of Amruta Mills Limited and others, reported in 2002 (3) G.L.H. 367 is concerned, it is held therein that-
" a tenant needs no protection against eviction by the landlord so long as he has necessary protection under the terms of the contract entered into with the landlord. A tenant's right to hold over after the termination of the contractual tenancy is different from the right to protection during the contractual tenancy and the two rights must be kept distinct from each other. In case of the former right provisions of the Rent Act come into play, while in case of the later right, ordinary law governing the rights of the tenant and landlord would become applicable".
*** Page 5 of 13 O/OJA/50/2005 JUDGMENT "it is settled law that the period of a subsisting lease cannot be curtailed in absence of a forfeiture clause in the lease deed. The contractual tenancy would thus subsist as governed by provisions of the T.P. Act and there cannot be any eviction from such tenancy".
*** "In case the Court is not empowered to deal with an asset like leasehold interest of the Company in liquidation it may, in a given situation, either give rise to or encourage mal practice by dishonest persons."
*** "On overall.... It is apparent that the terms of the lease are mostly permanent or in perpetuity, or for long fixed periods or at least till life time of the Company. The position therefore which emerges is that the contract which was entered into by the lessor with the Company subsists. Once that is so, the position in law is settled that the tenant, viz. the Companies herein, would be entitled to seek protection under the contract dehors the provisions of the Rent Act."
*** "In none of the cases, it was contended or pointed out that there is any breach of express condition which would entitle the landlord to invoke forfeiture. Even icf non-payment of rent for a particular period could be treated as a breach of one of the conditions the terms of the leased deeds do not envisage forfeiture. For the sake of argument, in a given case, even if it is to be found that non-payment of rent would entitle the landlord to seek determination of the lease it would be open to the Court ro relieve from forfeiture by issuing appropriate directions. However, all these aspects will have to be taken into consideration in each individual case, after the landlord applicant is able to establish not only nonpayment of rent, but entitlement to forfeiture and further that he has served a notice for such forfeiture".
Page 6 of 13 O/OJA/50/2005 JUDGMENT
***
"a secured creditor agrees to pay mesne profits with arrears of rent it was not possible to hold that the provisions of Section 535 of the Act were attracted and the Official Liquidator was justified in applying for disclaimer under the said provision"
*** "the property does not fall in any categories under section 535 of the Act and therefore Official Liquidator has no right to disclaim."
3.6 Mr. Chhaya has tried to distinguish the decision of the Apex Court in the case of Jabal C. Lashkari (supra) and submitted that the Apex Court in the said case has held that "rights of lesses under fixed term leases (like 99 years lease) are not curtailed by the provisions of the Rent Act, before expiry of the term; the lessor would be liable for eviction only on the grounds as enumerated in clauses (a) to (p) of sub- section (1) of Section 21 of the Act; that eviction of a tenant under a fixed term contractual lease can be initiated during subsistence or currency of the lease only on a ground as may be enumerated in clauses (a) to (p) of sub-section (1) of section 21 of the Act, if and only it is also provided as one of the grounds of forfeiture of the lease rights in the lease deed, not otherwise.
3.7 Mr. Chhaya submitted that in the facts of the present case, there is specific clause for forfeiture in case of non- payment of rent. Admittedly, as per terms of lease deed rent was to be paid in advance. The rent has not been paid after 1994 and therefore as per the judgment of the Division Bench, lessor is entitled to forfeit the tenancy and claim possession. The Official Liquidator cannot rely upon the ratio of the said Page 7 of 13 O/OJA/50/2005 JUDGMENT judgment to deny possession of the subject property to the lessor.
3.8 Mr. Chhaya further stated that without prejudice to what is stated above, the appellants are entitled to have possession by virtue of denial of title by O/L. In the sale deed it is stated as under:-
" ....the Vendor doth hereby grant convey and hereby assure and release unto the purchaser doth hereby confirm the said grant of non-agricultural land being City Survey NO.403 to 408 and 408 F.P. NO.28 T.P.No.10 having area of approx.1,24,451 Sq.Mtrs. of Mouje Rakhial, Tal: City, Dist: Ahmedabad to the purchaser of thereabouts more particularly described in the Schedule hereunder written together with all the privileges, easements, profits, advantages, rights and privileges interruption obstruction, claim or demand whatsoever at law and in equity TO HAVE AND TO HOLD THE SAID PREMISES hereby granted, released, conveyed, transferred and assured with their and behalf of the purchaser foe3ver to the end and intent that the said land described in the first schedule hereto shall be held by the purchaser as owner there absolutely and forever....."
The first schedule reads as under:-
"All piece or parcel of non-agricultural land admeasuring 1,24,451 sq.mtrs. situated on Land bearing Final Plot NO.28, T.P.S.No.10 City Survey NO.403 to 408 and 408 situate, lying and being at Mouje Rakhial, Taluka City, Districft Ahmedabad within Registration sub-district of Ahmedabad-7 (Odhav Zone) and District of Ahmedabad. The said land is bounded as under:-"
The land of F.P.NO.28 is bounded as under:-
On or towards North :: 80' T.P.10 Road; On or towards South ::F.P.29 (Baliyakaka Society) & F.P.30 On or towards East : 60' Road (Chakudiya Page 8 of 13 O/OJA/50/2005 JUDGMENT Mahdev) On or towards West " 100' Road;
3.9 Mr. Chhaya submitted that thus, sale deed is executed as if it is freehold property land whereas admittedly it is not a freehold property but leasehold property. The Official Liquidator has further observed that he has stated in the sale deed that O/L has full power and absolute power and authority to transfer the property, meaning thereby O/L has denied that subject property is a leasehold property. This amounts to denying of title. He further submitted that once title is denied, lessor is entitled to possession without any further proof of any facts. This will also result into complications because appellants name will be removed from revenue record. It is submitted that O/L could not have sold the subject property as freehold property. It is further submitted that O/L had not admitted the appellants/applicants to be land owners and therefore the Company Court has directed the O/L to ascertain factual position as to the entitlement to the rent by the appellants and outstanding of the rent. It is submitted that in 1975 when suit was filed, one of the appellants was also plaintiffs in suit for possession.
Therefore O/L could not have disputed atleast to the extent of one of the appellant i.e. Vishunubai Fulabhai Desai being co- ownder. Thus, title of the Vishnubhai Fulabhai having not been accepted by O/L amounts to denial of title. Once title is denied, there is no need to make any further inquiry.
3.10 Without prejudice to aforesaid contentions, it is submitted by Mr. Chhaya that rent has not been paid till this date and therefore application ought to have been allowed Page 9 of 13 O/OJA/50/2005 JUDGMENT and the learned Company Court while granting permission to sell leasehold lands ought to have exercised its power and authority to impose such terms and conditions which would met the ends of justice. It is submitted that though relationship of landlord and the tenant is perpetual it does not necessarily mean that rent is perpetual. It is submitted that amount of rent may become irrelevant with passage of time. He has relied upon the decision of the Apex Court in the case of Malpa Vishwanand Acharya V/s State of Maharasthra, reported in AIR 1998 (SC) 602.
3.11 Mr. Chhaya contended that when wages have gone up, rate of interest has gone up, price of lands have gone up, there as no reason to impose condition directing proposed purchaser to pay rent at a reasonable return on the market price. In this connection, it may not be out of place to note here that there has been change in the judicial approach towards relationship between the landlord and the tenant. It is held in the matter of Mohammad Ahmad and another V/s Atma Ram Chauhan and others, reported in (2011) 7 Supreme Court Cases 755 as under:
"17. In this context, we may profitably refer to the judgment pronounced by this Court in Atma Ram Properties (P) Ltd./., V. Federal Motors (P) Ltd.,. The relevant portion thereof is reproduced hereinbelow: (SCC p.718, Para 20).
"20. In the case at hand, it has to be borne in mind that the tenant has been paying Rs.371.90 ps. rent of the premises since 1944. The value of real estate and rent rates have skyrocketed since that day. The premises are situated in the prime commercial locality in the heart of Delhi, the capital city. It was pointed out to the High Court that adjoining Page 10 of 13 O/OJA/50/2005 JUDGMENT premises belonging to the same landlord admeasuring 2000 sq.ft. have been recently let out on rent at the rate of Rs.3,50-,000/- per month. The rent Control Tribunal was right in putting the tenant on term of payment of Rs.15,000 per month as charges for use and occupation during the pendency of appeal. The Tribunal took extra care to see that the amount was retained in deposit with it until the appeal was decided so that the amount in deposit could be disbursed by the appellant court consistently with the opinion formed by it at the end of the appeal. No fault can be found with the approach adopted by the Tribunal. The High Court has interfered with the impugned order of the Tribunal on an erroneous assumption that any direction for payment by the tenant to the landlord of any amount at any rate above the contractual rate of rent could not have been made. We cannot countenance the view taken by the High Court. We may place on record that it has not been the case of the respondent tenant before us, nor was it in the High Court, that the amount of Rs.15,000 assessed by the Rent Control Tribunal was unreasonable or grossly on the higher side".
"21. Accordingly to our considered view ... at all levels.
These are as follows:-
(i) The tenant must enhance the rent according to the terms of the agreement or at least by ten per cent, after every three years and enhanced rent should then be made payable to the landlord. If the rent is too low (in comparison to market rent), having been fixed almost 20 to 25 years back then the present market rate should be worked out either on the basis of valuation report or reliable estimates of building rentals in the surrounding areas, let out on rent recently.
(ii) Apart from the rental, property tax,. Water tax, maintenance charges, electricity charges for the actual consumption of the tenanted premises and for common area shall be Page 11 of 13 O/OJA/50/2005 JUDGMENT payable by the tenant only so that the landlord gets the actual rent out of which nothing would be deductible. In case there is enhancement in property tax, water tax or maintenance charges, electricity charges then the same shall also be borne by the tenant only."
"22. These are some of the illustrative guidelines and norms but not exhaustive, which can be worked out between the landlord and tenant also as to avoid unnecessary litigation in court."
3.12 Mr. Chhaya submitted that in view of above, the learned Company Judge ought to have imposed a condition of payment for a higher rent or could have granted permission to claim higher rent in view of observations made in the above judgment i.e. at a reasonable return on the market rate to serve end of justice. Further the learned Company Judge ought to have considered that the appellants are owners and therefore in view of default by the lessee company, the owner's property (leased property) cannot be auctioned. He submitted that the condition of payment of higher rent would have served interest of lessor as well as secured creditors and the labourers and all other stake holders in as much as law is expected to be dynamic and not static.
4. Having considered the arguments advanced by the learned advocates for both the sides, we are of the opinion that the issue involved in the matter is squarely covered by the decision of the Apex Court in the case of Jabal C. Lashkari (supra). We therefore see no reason to interfere in the impugned order passed by the learned Single Judge which Page 12 of 13 O/OJA/50/2005 JUDGMENT is in accordance with law. The learned Company Judge has rightly come to the conclusion that the appellants are at the most entitled to receive their rent as per the provisions contained in the lease deed and for that purpose the Court directed the O.L to ascertain the factual position and to pay rent which was outstanding. The Company in liquidation was not the statutory tenant and it had not been pointed out that there was any prohibition against the sale, transfer or creation of any charge over the property which had been leased out to the Company in liquidation.
5. For the foregoing reasons, appeal is dismissed. No costs.
(K.S.JHAVERI, J.) (A.G.URAIZEE,J) divya Page 13 of 13