Karnataka High Court
M/S. M. J. Mehta & Co vs Official Liquidator on 21 October, 2022
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF OCTOBER, 2022
BEFORE
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
COMPANY APPLICATION NO.240 OF 2019
IN
COMPANY PETITION NO.111 OF 1998
BETWEEN
M/S. M. J. MEHTA & CO.
DHANRAJ MAHAL,
CHATRAPATI SHIVAJI MAHARAJ MARG
BOMBAY - 400 039
REPRESENTED BY ITS PARTNER
MR. TAPAN MEHTA
...APPLICANT
(BY SRI. J. HUDSON SAMUEL., ADVOCATE)
AND
1. OFFICIAL LIQUIDATOR
ATTACHED TO THE HIGH COURT OF KARNATAKA
AS LIQUIDATOR OF M/S STAR SPINS
& TWIST MACHINERIES LTD., (IN LIQN)
CORPORATE BHAVAN, 12TH FLOOR
RAHEJA TOWERS, M.G.ROAD,
BENGALURU - 560 001.
2. KARNATAKA INDUSTRIAL AREAS DEVELOPMENT
NO.49, 4TH & 5TH FLOOR
EAST WING, KHANIJA BHAVAN,
RACE COURSE ROAD
BANGALORE - 560 001
AND ALSO AT: ZONAL OFFICE AT
PLOT NO.33/A, LAKKAMANNAHALLI INDUSTRIAL AREA
POONA-BANGALORE ROAD,
DHARWAD - 580 004
REPRESENTED BY ITS SECRETARY.
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3. M/S SURI AUTO PRODUCTS LTD.,
SY. NO.42, M.T.SAGAR INDUSTRIAL ESTATE,
GOKUL ROAD, HUBLI - 580 030
REPRESENTED BY ITS PROPRIETOR
MR. ANIL JAGADISH SURI.
...RESPONDENTS
(BY SRI. DHYAN CHINNAPPA, SENIOR COUNSEL FOR
SRI. P.V. CHANDRASHEKAR., ADVOCATE FOR R-2
SRI. MANU P. KULKARNI., ADVOCATE FOR
SMT. SANJANTHI SAJAN POOVAYYA., ADVOCATE FOR R-3 )
THIS COMPANY APPLICATION IS FILED UNDER RULE 9 OF
THE COMPANY COURT RULES 1959 READ WITH THE PROVISIONS
OF THE COMPANIES ACT, 1956 TO INITIATE AN INQUIRY WITH
REGARD TO MALFEASANCE AND MISFEASANCE COMMITTED BY
THE RESPONDENTS AND ALL PERSONS CLAIMING THROUGH OR
UNDER THEM IN RESPECT PROPERTY BEARING PLOT NO. 116(P)
OF KELAGERI VILLAGE, KELAGERI HOBLI, DHARWAD TALUK,
DHARWAD DISTRICT, DHARWAD AD-MEASURING 28231 SQ.MTS.,
OR THEREABOUTS AND BOUNDED ONT HE NORTH BY KIADB
ROAD, SOUTH BY BLOCK NO. 116(P1), EAST BY SC/ST CLUSTER,
ON THE WEST BY EXISTING ROAD TOGETHER WITH ALL
BUILDINGS, SHED AND CONSTRUCTIONS EXISTING THERE ON:
AND ETC.
THIS COMPANY APPLICATION COMING ON FOR ORDERS
THIS DAY, THE COURT MADE THE FOLLOWING:
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ORDER
The instant application is filed by the applicant - M/s.M.J.Mehta & Co., seeking the following reliefs:-
" a. To initiate an inquiry with regard to malfeasance and misfeasance committed by the Respondents and all persons claiming through or under them in respect property bearing Plot No. 116(P) of Kelageri Village, Kelageri Hobli, Dharwad Taluk, Dharwad Dsitrict, Dharwad ad-measuring 28321 sq.mts., or thereabouts and bounded on the North by KIADB Road, South by Block No. 116(P1), Est by SC/ST cluster, ont he West by Existing Road together with all buildings, shed and constructions existing there on;
b. Declare that the Lease -Cum -Sale
Agreement dated: 12.04.2019 registered as
Document No. 1585 in Book. IV, before the Deputy Sub-Registrar, Dharwad is not valid, void-ab-initio, non-est in the eyes of law and not binding on the Applicant and / or affecting Applicant's existing rights in respect of subject property bearing Plot No. 116(P) of Kelageri Village, Kelageri Hobli, Dharwad Taluk, Dharwad Dsitrict, Dhartwad ad-measuring 28321 sq.mts., or thereabouts and bounded on the North by KIADB Road, South by Block No. 116(P1), Est by SC/ST cluster, on the West by Existing Road together 4 with all buildings, shed and constructions existing thereon;
c. Consequently, preserve the status-quo with regard to the subject property bearing Plot No. 116(P) of Kelageri Village, Kelageri Hobli, Dharward, Dharwad Taluk, Dharwad Dsitrict, Dhartwad ad- measuring 28321 sq.mts., or thereabouts and bounded on the North by KIADB Road, South by Block No. 116(P1), Est by SC/ST cluster, on the West by Existing Road together with all buildings, shed and constructions existing thereon;
d. Pass such other order or direction as this Hon'ble Court deems fit under the facts and circumstances of the case."
2. In the application, the applicant has contended that around 150 acres of land situated amongst the various survey numbers in Kelageri village, Dharwad, was allotted in favour of the applicant vide two lease - cum - sale agreements dated 07.12.1983. While one lease-cum-sale agreement was in respect of 113 acres 34 guntas, the remaining extent was comprised of in the other lease-cum-sale agreements. It is contended that the lease period under the said agreements was 10 years. The applicant has contended that the aforesaid 5 lease deeds in respect of total extent of 150 acres, permitted the applicant to sublet / sub-lease the land in favour of others. Accordingly, the applicant executed the deed of sub-lease in favour of the company in-liquidation i.e., M/s.Star Volkmann Ltd., in respect of an extent of 28 acres of land for a period of 10 years vide registered sub-lease deed dated 12.04.1985.
2.1 It is further contended that pursuant to the supplementary lease agreements dated 06.04.1991 and 22.11.1993 executed between the KIADB and the applicant extending the lease for a further period of 11 years and the period of implementation of a project by 24 months, the applicant executed a supplementary agreement dated 02.12.1993 in favour of the company in-liquidation extending the sub-lease in relation to the subject land measuring 28 acres for a further period of 11 years.
2.2 The applicant has contended that in pursuance of the aforesaid sub-lease agreement executed by the applicant in favour of the sub-lessee i.e., company in-liquidation was put in possession and enjoyment of the subject property 6 measuring 28 acres. The applicant has further contended that it was surprised to see the advertisement in 'Economic Times' dated 30.12.2005, wherein the official liquidator had invited tenders for sale of 28 acres of the subject land, to which, the applicant filed his objections. The applicant learnt that the company in-liquidation was directed to be wound up by this Court's order dated 10.12.1998 passed in the aforesaid Company Petition No.111/1998.
2.3 In these proceedings, OLR No.44/2006 was filed by the official liquidator for permission to sell the assets of the company, which was allowed by this Court vide order dated 10.04.2006 in respect of only the plant and machinery. In this context, it is contended that though the applicant had filed caveat, its objections were kept open to be urged at the time of confirmation of sale. Subsequently, on 20.07.2006, this Court confirmed the sale of plant and machinery, subject to the condition that the same shall be removed only after ensuring that no damage is caused to the building. 7
2.4 The applicant contends that the subject land also having been brought for sale, the highest bidder one M/s.Power Control Equipments filed an application in C.A.No.808/2006 to accept and approve the bid offered by it for the land and building and confirm the sale in its favour. The said application was rejected by this Court vide order dated 06.07.2007 on the ground that neither the company in- liquidation nor the official liquidator had any title over the property. It is contended that the said order passed by this Court has become final.
2.5 Subsequently, the official liquidator filed an application C.A.No.1458/2007 for a direction for sale of the subject land and building and for other reliefs. In the said application, the applicant herein was arrayed as 1st respondent, while KIADB was arrayed as 2nd respondent and both of them opposed the said application. It is contended that though the said application C.A.No.1458/2007 was dismissed by this Court vide order dated 20.12.2013, the rights of the parties was not addressed by this Court. 8
2.6 Subsequently, the official liquidator has filed OLR 401/2015 seeking sale of the building, sheds and structures on the subject property and the same was withdrawn with liberty to the official liquidator to file a fresh OLR as per the order dated 01.04.2016. Accordingly, the official liquidator filed one more OLR 61/2016 seeking sanction for sale of buildings, industrial sheds and other temporary structures by demolishing the same and removing the debris after valuing the same by appointing the approved valuer. The applicant as well as the KIADB filed their objections to the said application. By order dated 05.04.2019, this Court disposed of OLR 61/2016 directing valuation of the buildings / temporary structures and industrial sheds to be obtained from the approved valuer.
2.7 The applicant has contended that when the matter stood thus, it noticed certain activities such as painting, renovation of the subject building and upon enquiry, learnt about certain documents, events that had occurred when the matter was sub judice before this Court. It is contended that 9 various documents relating to the alleged resumption of land were not within the knowledge of the applicant, who was also not aware about the portions of the subject property being allotted in favour of the 3rd respondent - M/s.Suri Auto Products Ltd., The applicant has also put forth contentions with regard to the various events and orders that were passed by this Court subsequent to this Court's order dated 05.04.2019 in order to contend that the lease-cum-sale agreement dated 12.04.2019 said to have been executed by KIADB in favour of the 3rd respondent were a result of collusion and connivance between the respondents and the same does not bind the petitioner nor its right over the subject property.
2.8 It is also contended that the official liquidator was in possession and enjoyment of the subject property which is in the custody of this Court in view of the present winding up proceedings and as such, the lease-cum-sale agreement dated 12.04.2019 executed in favour of 3rd respondent by the 2nd respondent - KIADB is invalid and void and acts of the 10 respondents amount to malfeasance and misfeasance and as such, the applicant is entitled to the relief sought for in the application.
3. As stated supra, the official liquidator is arrayed as 1st respondent in the application, in which the KIADB is arrayed as 2nd respondent and the allottee from the KIADB in the lease-cum-sale agreement dated 12.04.2019 is arrayed as 3rd respondent. All the respondents have filed separate statement of objections and have opposed the application.
4. Apart from various contentions urged in support of their defence, it is contended by the respondents that the applicant does not have any manner of right, title, interest or possession over the subject land and accordingly, does not have locus standi to maintain the application. It is also contended that the applicant does not have locus standi to maintain the application alleging misfeasance / malfeasance under Section 398 or Section 543 or any other provision of the Companies Act, 1956. It is further contended that while the orders dated 06.07.2007 passed by this Court in 11 C.A.No.808/2006 clearly declares that the company in- liquidation does not have title over the subject property, the subsequent order dated 20.12.2013 passed by this Court in C.A.No.1458/2007 also declares that the lease in favour of the applicant as well as the sub-lease in favour of the company in- liquidation have been terminated and are no longer subsisting. It is contended that the applicant herein is a party to the aforesaid orders and having not chosen to challenge the same, the applicant does not have any subsisting right over the subject property and on this score also, the applicant does not have locus standi to maintain the present application.
4.1 The respondents have also contended that the termination of the lease in favour of the applicant and the sub- lease in favour of the company in-liquidation was confirmed by the KIADB vide communication dated 07.04.2014 which was followed by resumption of the subject land pertaining to a public notice dated 29.04.2014 and consequently, having resumed the subject land and taken possession of the same by following the due process of law, the termination / 12 determination of the lease hold rights as well as the sub-lease hold rights of the applicant and the company in-liquidation respectively, have been confirmed and the same having not been challenged by either the applicant or the official liquidator, neither the official liquidator nor the applicant have any right over the subject property.
4.2 The respondents have also contended that the limited request made by the official liquidator in OLR 61/2016 was for permission to sell the building, sheds and other temporary structures by demolishing the same after considering its value and the official liquidator does not claim any right over the subject land, which is not an asset of the company in view of the aforesaid orders passed by this Court and the events that have transpired, referred to supra. It is therefore contended that since the subject land had ceased to be the asset of the company, it was no longer custodia legis or in the custody of this Court and as such, there was no prohibition / bar for the KIADB to allot the same in favour of 3rd respondent. Thus, specifically denying the various 13 contentions and claims urged by the applicant, the respondents have sought for dismissal of the instant application.
5. I have heard Sri.J.Hudson Samuel, learned counsel appearing for the applicant and Sri.Dhyan Chinnappa, learned Senior counsel appearing for Sri.P.V.Chandrashekar, learned counsel for 2nd respondent - KIADB as well as Sri.Manu P.Kulkarni, learned counsel for Smt.Sanjanthi Sajan Poovayya for 3rd respondent.
6. In addition to reiterating the various contentions urged in the application and referring to the material on record, learned counsel for the applicant submits that having regard to the material on record, the application deserves to be allowed. It is submitted that apart from the fact that the applicant has locus to maintain and prosecute the application, since it is the original lessee in respect of the subject land, the earlier orders passed by this Court having adjudicated its rights and contentions, which are kept open and the subject land is custodia legis within the meaning of Section 456 of the 14 Companies Act, 1956 and the allotment of the subject land is void in view of Section 537 of the Companies Act. It is therefore submitted that the application deserves to be allowed. In support of his contentions, learned counsel for the applicant has placed reliance upon the following decisions:-
(i) A.Talukdar and Company (Fertilizer) Private Limited vs. Official Liquidator, High Court of Calcutta and others - (2016) 14 SCC 289;
(ii) Phatu Rochiram Mulchandani vs. Karnataka Industrial Areas Development Board and others - (2015) 5 SCC 244.
7. Per contra, learned Senior counsel for the 2nd respondent - KIADB in addition to reiterating the various contentions urged in the statement of objections submits that there is no merit in the application and the same is liable to be dismissed.
8. I have given my anxious consideration to the rival submissions and perused the material on record. 15
9. After having perused the material on record, in my considered opinion the application filed by the applicant is liable to be dismissed for the following reasons:-
(i) The undisputed material on record clearly indicates that the applicant is not an aggrieved person who has locus to seek the reliefs sought for in the application i.e., misfeasance / malfeasance alleged by it either under Section 398 or Section 543 or any other provision of the Companies Act. In the instant case, undisputedly, the applicant is neither a share holder / creditor / director / manager / liquidator / promoter / member or any other officer of the company in-liquidation.
Under these circumstances, the present application seeking initiation of enquiry on the ground of malfeasance / misfeasance is clearly not maintainable at the instance of the applicant, who is merely an erstwhile lessee simpliciter of the subject land and consequently, in the absence of any locus standi on the part of the applicant to file and prosecute the application, it is clear that the applicant does not have locus standi to maintain and prosecute the application having regard 16 to the restricted / limited scope and ambit of the present proceedings before this Court and consequently, the application is liable to be dismissed.
(ii) A perusal of the order dated 06.07.2007 passed by this Court will clearly indicate that the application filed by the auction purchaser for acceptance and approval of his bid for the subject land and building and for confirmation of sale was rejected by this Court specifically holding that the company in- liquidation does not have title over the subject property. In fact, in the said order, the applicant herein contended that the company in-liquidation was not the owner of the property and it is the applicant herein who is the owner of the subject property. The said order dated 06.07.2007 passed in C.A.No.808/2006 reads as under:-
" This is an application filed by the applicant/company which is a successful bidder in the auction held by the Official Liquidator, requesting the Court to accept and approve the bid of Rs. 317.50 lakshs offered by the applicant for the land and building.
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2. This Court by an order dated:
10.12.1998 wound up the Company M/s. Star Spin and Twist Machineries Limited in COP 111/98. The Official Liquidator attached to this Court was put in charge of the affairs of the Company in liquidation. On a report made by the Official Liquidator in OLR No. 54/05, this Court by an order dated: 01.12.2005 permitted him to take steps to bring the properties of the Company was published in the editions of the Economic Times and Vijaya Karnataka - a Kannada daily which is circulates in Hubli and the same was published in the aforesaid newspapers on 30.12.2005. The entire assets of the Company was classified into two head:
Lot (1) Land & Building and Civil Works. Lot (2) Consisted of Plant and Machinery. The assets covered in Lot No.1 consisted of land and building located at Kelgeri Industrial Area, Kelgeri Hobli, Dharwad District. The extent of the land is 28 acres which consist of 13 acres and 18 guntas in Block 115 and 14 acres and 22 guntas in Block 116.
3. The applicant initially quoted a sum of Rs. 121.38 lakhs as his bid however, he has subsequently increased to Rs. 3,17,50,000/- after interse bidding, he was declares provisionally as a successful bidder subject to approval of sale by this Court. In terms of the auction notice, the applicant has deposited a sum of Rs. 26,00,000/- as Earnest Money 18 deposit. The Official Liquidator has confirmed the receipt of Rs. 26,00,000/-.
4. This application is filed informing the Court that the applicant is ready and willing to perform his part of paying th balance sale consideration and therefore his offer may be accepted and approved and the sale in his favour be confirmed and the Official Liquidator be directed to execute the necessary sale documents and a direction be issued to the Official Liquidator to handover possession of the property sold.
5. One M/s. M.J.Mehta and Company has entered caveat and has also filed objections to the application bringing to the notice of the Court that the Company under liquidation is not the owner of the property and therefore he is opposing the confirmation of sale on the ground that the ownership vests with them.
6. As the sale of the property is not yet confirmed by this Court, the question of going into the right of M/s. M.J.Mehta & Co. at this stage in this proceeding would not arise. Therefore, it is necessary to go into his claim. But the fact remains to be considered is " Whether the Company is the owner of the Property which is auctioned or whether the auction purchaser would get title to the property?".
7. It is settle law that in Court auction what the auction what the auction purchaser gets in the 19 right, title and interest of the judgment debtor. The Court neither confers title nor is obliged to make good the title in favour of a auction purchaser, if the title is shown to be defective. But none- the- less, the Court has a responsibility to see that the auction purchaser is not kept in dark. He should be told to the best of in ability what the right of the judgment debtor. In the case, the Company under liquidation is not the owner on the day the property is sold to the auction purchaser. In this context, I called upon the official liquidator to show how the company had acquired title.
8. The material on record shows this property originally belonged to KIADB. Under a lease cum sale agreement the property has been leased to M/s. M.J. Mehta & Co. M/s. M.J.Mehta & Co. was permitted to sub - lease. It is in pursuance of the said permission, they have subleased the schedule property to the company under liquidation . The original period of lease was 10 years and it was extended by another 10 years period. Both these periods have come to an end. Admittedly, till today no sale deed is executed by the KIADB in favour of the original lease i.e., M/s. M.J. Metha & Co. or in favour of the sub- leases- the Company under liquidation. The title of the property even to this day is with KAIDB. May be the original lessee or by virtue of a sublease, the Company under liquidation may enforce 20 the terms of the agreement they have a right to secure a sale deed from KIADB, but, till that right is enforced, sale deed is executed either in the name of the lease or sub- lessee, neither the lessee nor the sub- lease has title to the property as on today. In this context this paper publication issued inviting sealed tenders gives the description of the property. It also makes it clear that the sale is " As is where is and where is and whatever the is vases". However, there is not specific reference to fact whether it is free-hold or leas-hold right, which is sought to be sold. The said notification has also made it clear that the sale is subject to confirmation by this Court. In this context, before confirming the sale in favour of the successful bidder the court made it clear to the auction purchaser the aforesaid legal position viz., that the company under liquidation is not the owner of the property in question. However, he was called upon to say whether in view of the aforesaid admitted position, he is willing to purchase the property in as is where is condition. In other words, under the Court sale, the purchaser would to be getting title to the property which is auctioned.
9. Learned Counsel for the auction purchaser submits the price of Rs. 317.50. laksh which the auction purchaser offered is on the understanding that the auction purchaser would be getting absolute title to the property which is 21 auctioned. They were not aware that as on today it is only lease- hold rights which the company under liquidation possessed. Further, he submitted if the Court is willing to direct the official liquidator to take steps and get a sale deed and then convey absolute title, he would be willing to still purchase the property for the aforesaid consideration.
10. As is clear from the paper publication, the property was sold in as is and where condition. In other words, what is put to auction is the lease - hold rights of the company under liquidation. May be as the said fact was not explicitly made clear in the publication, the auction purchaser was under the impression, that he would get absolute title. After coming to know of what the right of the Company under liquidation as on today, rightly he has backed out. This Court is under no obligation to make good the title to the auction purchaser, though the property is auctioned by the Court. What the auction purchaser gets on such sale is the right, title and interest of the Company under liquidation.
11. In that view of the matter, as the auction purchaser is not willing to officer the price which he has offered to purchase the lease hold right the question of confirming the same would not arise. In view of the confusion created, it would not be proper to penalise the auction purchaser by with - holding 22 the Earnest Money Deposit which he has deposited. Under these circumstances, I pass the following:
ORDER C.A. 808/06 for confirmation of sale is hereby rejected. Official Liquidator is directed to refund the entire Rs. 26.00 lakhs which he has deposited within two weeks from today.
As can be seen from the aforesaid order, not only this Court declared that the company in-liquidation is not the owner of the subject property, the conduct of the applicant herein in contending that the company in-liquidation was not the owner and that ownership vested with the applicant and not the company, is sufficient to show that the applicant is estopped from contending that the subject property belongs to the company in-liquidation and thus, it is in custodia legis of this Court. As rightly contended by the respondents, the said order, to which the applicant herein is also a party has attained finality and become conclusive and binding upon the applicant whose claim is liable to be rejected.
(iii) The undisputed material on record also indicates that the official liquidator filed C.A.No.1458/2007 seeking sale 23 of the subject property inter alia contending that the sale was for a lease hold land that the sub-lease in favour of the company in-liquidation, in respect of which, the official liquidator was appointed was subsisting and that accordingly, the official liquidator was entitled to sell the land which was the asset of the company. The applicant herein was a party to the said application and it opposed the same. After hearing the parties, this Court came to the conclusion that the lease / lease hold rights in favour of the applicant herein had been terminated and consequently, the sub-lease / sub-lease rights in favour of the company in-liquidation had also been terminated and was no longer subsisting and as such, the official liquidator who had stepped into the shoes of the company in-liquidation was not entitled to take steps to sell the subject property, which could not be construed or treated as the asset of the company. The said order dated 20.12.2013 by this Court in C.A.No.1458/2007 reads as under:-
Heard the learned counsel for the Official Liquidator in C.A.1458/07 and the learned Senior Advocate Shri S.Vijayashankar, appearing for the 24 learned counsel for the respondent No.2 and the learned counsel appearing for respondent No.1.
2. The present application in C.A.1458/07 is filed in the following background:
M/s. Star Spin and Twist Machineries Limited, the company in liquidation, was ordered to be wound up by an order dated 10/12/1998 in COP No. 111/98. The Official Liquidator attached to this court, was appointed as the liquidator. M/s. M.J.Mehta and Company, a partnership firm, having its registered office at Mumbai, had applied to the Karnataka Industrial Area Development Board (KIADB, for brevity), the second respondent herein, for allotment of land and an extent of 133.34 acres was allotted against a lease amount of Rs.6,76,269/-, which was 99% of the tentative cost of the land, at that point of time, under an agreement dated 7/12/1983, entered into with the KIADB, as the lessor, in lands bearing Block Nos. 115/1, 116, 118, 119/2, 120 and 128 of Kelageri, Dharwad Taluk KIADB had thereafter granted a further extent of 36 acres 32 guntas of land under a possession certificate dated 20.6.1983.
In terms of the lease deed, the lessee was at liberty to sub-lease the demised land with the permission of the lessor. This option had been exercised and it had been sub-leased in favour of 25 two companies namely M/s. Suessen Textiles Bearing Limited and M/s. Star Volkman Limited, now known as Star Spin and Twist Machineries Limited, the company in liquidation, measuring 27 acres and 28 acres, respectively. Under the sub-lease dated 12/4/1985 for a period of 10 years under which was agreed that the land measuring 28 acres situated in Block No. 115 and 116 of Kelageri Hobli, with the right to purchase the land in terms of the original lease deed in favour of M/s. M.J.Mehta and Company. It transpires that after expiry of the lease period, M/s. M.J.Mehta and Company had approached the KIADB for extension of the lease, for a further period of 11 years, since the lease was coupled with the condition that the land ought to have been developed, apart from meeting other conditions. Since M/s. M.J.Mehta and Company had not complied with the condition of developing the land, a further extension of the lease period was sought from 18/1/1982 and it was so extended, under a supplementary agreement dated 22/11/1993, for a period of 11 years or till the sale deed was executed, whichever was earlier. The extended period also expired on 17/1/2003.
Insofar as the company in liquidation is concerned, it was also extended by a supplementary agreement dated 2/12/1993 between 26 M/s. M.J.Mehta and Company and Star Spin and Twist Machineries Limited. Thereafter the company in liquidation, having been ordered to be wound up, and since there were no funds available with the Official Liquidator to pay the balance sale consideration, in order to have the sale deed executed in respect of the demised premises, the transaction was not carried forward. It is in this background that the present application is filed seeking a direction to the KIADB to execute a sale deed after receiving the balance consideration due under the lease cum sale agreement, at this point of time.
3. The said application has been opposed and it is contended on behalf of the KIADB by the learned Senior Advocate Shri S.Vijayashankar that the lease in favour of M/s. M.J.Mehta and Company was duly determined and resumption of the land was notified as per show cause notice dated 29.3.1996, out of the total extent of 150 acres and 26 guntas, which was allotted to the lessee M/s. M.J.Mehta and Company, an extent of 95 acres and 26 guntas has been resumed by the KIADB and the lands have been subsequently allotted to various entrepreneurs and the remaining extent of 55 acres, out of which a part is the subject-matter of the present application, the Board after having 27 terminated a lease insofar as the original lease deed in favour of M/s. M.J.Mehta and Company is concerned, in terms of Annexure-R dated 25/2/2000, had proceeded to take possession of the above extent. The remaining extent, including the portion which is the subject-matter of the present application, could not be resumed in view of the proceedings pertaining to the units which were in their occupation, pending before the Board of Industrial and Financial Reconstruction (BIFR, for brevity), in a proceeding bearing No. 30/97 and 29/98. It is in this background that the KIADB stayed its hand in proceeding to resume possession of the remaining extent and after the proceedings before the BIFR culminated, there were proceedings initiated by recourse to the provisions of Section 4 of the Karnataka Public Premises (Eviction of Unauthorized Occupants) Act, 1974, to which the Official Liquidator had replied indicating that the company in liquidation has been wound up and therefore the matter is pending in proceedings before this court.
In the meanwhile, it is stated that an application was filed by a financial institution namely Industrial Development Bank of India (IDBI) before the Debts Recovery Tribunal, Bangalore, in O.A.649/1999. In the said proceedings, the IDBI 28 claimed recovery of its debt and extensively sought to attach the lease hold rights which were held by the company in liquidation. The guarantors to the debt, were also made parties to the proceedings. It is pursuant to the said proceedings, that the IDBI is said to have obtained a recovery certificate. The IDBI being left with no effects of the company in liquidation against which it could proceed, except the lease hold rights which were available, has sought for transfer of the same in its favour through the KIADB. It is at that point of time that the present application is filed. Therefore it is the case of KIADB that the lease having been terminated in favour of M/s. M.J.Mehta and Company, the sub- lease, if any, would also terminate and the question of the Official Liquidator seeking to claim that the lease hold rights conferred on M/s. Star Spin and Twist Machineries Limited, the company in liquidation, would be available for being transacted, is therefore misleading and without reference to the tenability of the claim of the IDBI or M/s. M.J.Mehta and Company, who is also represented in these proceedings. It is contended that any such permission, is not capable of being granted in favour of the Official Liquidator.
4. It is on this short question that the present application would have to be decided. Given the 29 fact situation that there was a lease deed in respect of 150 acres of land in favour of the lessee, who was in turn permitted to sub-lease the property, subject, of course to the conditions that he shall pay the rent and develop the land as contemplated under the lease deed and that not having been complied with, though there were permissions granted to sub-lease the lands, the question whether on termination of the lease, the sub-lease would subsist on general principle, would have to be answered in the negative. Therefore, without addressing the rights of the several parties involved herein, the short question as to whether the Official Liquidator would be in a position to lay a claim to any leasehold rights which the company in liquidation, might have procured under a sub-lease which is any longer subsisting, is the question. The answer is clearly in the negative. Accordingly the application stands disposed of.
Consequently, the application in C.A.663/08 is also disposed of without expressing any opinion. A perusal of the aforesaid order passed by this Court will clearly establish that this Court has not only declared that the lease in favour of the applicant herein has been terminated but also that the sub-lease in favour of the company in- 30 liquidation had stood determined and terminated and was no longer subsisting in respect of the subject property. In view of the declaration of this Court that the sub-lease in favour of the company in-liquidation has stood determined / terminated and was no longer subsisting, it cannot be said that the subject property was an asset of the company or custodia legis before this Court in these proceedings. As stated supra, even this order, to which the applicant is a party has attained finality and become conclusive and binding upon the applicant, who is estopped in law and fact from putting forth contrary claims and contentions by way of the present application.
(iv) The material on record also indicates that the periods covered under the lease deeds of the year 1983 and the supplementary lease agreement of the year 1991 between the KIADB and the applicant have come to an end and the lease have stood terminated by efflux of time under Section 111(a) of the Transfer of Property Act. So also, the periods covered under the sub-lease agreement of the year 1985 as well as the supplementary agreements of the years 1991 and 31 1993 by the applicant in favour of the company in-liquidation have also expired and consequently, the sub-lease has also stood terminated and determined by efflux / lapse of time. A perusal of the terms and conditions of the lease seed, sub- lease deed and other supplementary agreements, will clearly indicate that sub-lease and the period prescribed therein is coterminous and coextensive with the main lease and upon expiry and termination of the lease, the sub-lease also would expire and got extinguished. It is an undisputed that after expiry / termination of the lease and sub-lease as contemplated under the aforesaid documents as well as Section 111(a) of the Transfer of Property Act, the KIADB has not executed any other documents, deeds etc., in favour of either the applicant or the company in-liquidation in respect of the subject property. Under these circumstances, it is clear that the company in-liquidation and/or the official liquidator do not have any subsisting right, title, interest or possession over the subject property, which cannot be construed or treated as an assent of the company for the purpose of making it 32 custodia legis within the meaning of Sections 456 and 537 of the Companies Act, 1956 and on this ground also, the application is liable to be rejected.
(v) The undisputed material on record will clearly indicate that the applicant does not have any semblance / vestige of any right or claim over the subject property in view of the following undisputed facts and circumstances;
(a) The applicant is not in possession or enjoyment of the subject property;
(b) The lease in favour of the applicant has expired / stood terminated by efflux of time;
(c) The sub-lease in favour of the company in-liquidation has also stood expired / terminated and the sub-lease deed does not permit the applicant / original lessee to re-enter the subject property; and
(d) The applicant does not have any other right recognized or known to law over the subject property.
It is therefore clear that in the absence of any semblance of right, title, interest or possession over the subject property, the applicant does not have locus standi to maintain or prosecute the present application. 33
(vi) A perusal of OLR 61/2016 filed by the official liquidator will indicate that the official liquidator who represented the company in-liquidation has neither put forth the claim of title or the claim of lease hold rights / sub-lease rights over the subject property. In fact, the plaint and machinery were permitted to be removed vide order dated 10.04.2006 passed in OLR 44/2006. Even in OLR 61/2016, the limited / restricted claim of the official liquidator was with regard to buildings, sheds and temporary structures with reference to their value by demolishing the same and the official liquidator do not claim title or lease hold rights over the subject property / land nor stated that the land was an asset of the company in-liquidation. It is therefore clear that the subject land was not an asset of the company capable of being custodia legis within the meaning of Section 456 r/w Section 537 of the Companies Act and consequently, on this ground also, the claim of the applicant is liable to be rejected.
(vii) A perusal of the objections filed by the applicant on 03.08.2018 to OLR 61/2016 will clearly establish that the 34 applicant herein had sought for dismissal of OLR 61/2016 by denying the right, title and possession of the official liquidator on behalf of the company in-liquidation. In fact, the applicant herein has specifically contended that the earlier orders passed by this Court in C.A.No.808/2006 dated 06.07.2007 and C.A.No.1458/2007 dated 20.12.2013 had become final. Further, the applicant claims right only over the building and structures and not over the land. It is also relevant to state that in unequivocal terms, the applicant herein stated that the subject land was an asset of the company and that the claim of the applicant was only with regard to the usufructs of the improvements made on the property. It is therefore clear that in view of the specific stand taken by the applicant herein that it has right over only the usufructs arising / accruing from the buildings, structure etc., and no claim in respect of the subject land has been put forth coupled with the specific contention that the subject property was never an asset of the company, which has been made a ground to seek dismissal of OLR 61/2016, the applicant not only does not have locus standi but 35 is also estopped from putting forth the claim over the subject property on the ground that the subject property is an asset of the company or custodia legis and as such, the contention of the applicant is liable to be rejected.
(viii) The material on record also indicates that pursuant to the order passed by this Court in C.A.No.1458/2007, the KIADB confirmed termination of the sub-lease by issuing a communication dated 07.04.2014 and resumed the land by following the due process of law viz., published notice dated 29.04.2014, mahazar dated 07.05.2014 etc., It is an undisputed fact that the said resumption of the subject property by the KIADB as long back as in 2014, has not been challenged by the applicant, who is not entitled to claim any right over the subject land on this ground also.
(ix) Insofar as the contention of the applicant by placing reliance on the judgments of the Apex Court in order to contend that in view of the winding up proceedings, the KIADB could not have taken steps to resume the subject property and take possession of the property when the property was 36 custodia legis within the meaning of Section 456 and that the allotment in favour of the 3rd respondent by the KIADB is void is concerned, in view of my finding above that the applicant does not have locus standi to maintain and prosecute the present application, coupled with the fact that even according to the applicant, the subject property was no longer an asset of the company in-liquidation and in view of the aforesaid orders passed by this Court, the said contention of the applicant placing reliance upon the judgments of the Apex Court cannot be accepted, particularly in view of the special / peculiar facts and circumstances obtaining in the instant case which are different and distinct from the facts and circumstances obtaining in the said judgments of the Apex Court.
10. In view of the foregoing reasons, the company application is devoid of merit and consequently, the same is hereby dismissed.
Sd/-
JUDGE Srl.