Calcutta High Court
Tata Steel Ltd. vs Official Liquidator on 6 December, 2007
Equivalent citations: [2008]143COMPCAS563(CAL)
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
JUDGMENT Sanjib Banerjee, J.
1. This is a disclaimer application with a twist. The applicant seeks a direction on the official liquidator to make over possession of the concerned premises to it with knowledge that it is not the official liquidator who is in actual possession of the premises.
2. The applicant insists that even without its endeavour being facilitated as it has been in this case, it is entitled to seek not only a direction on the official liquidator to surrender the rights of the company in liquidation in respect of the property in its favour but also seek a direction on the official liquidator to remove the trespasser from the premises and make over possession. The answer to such issue need not be given in these proceedings by reason of the fortuitous event that overtook the question.)
3. The applicant is a lessee under the State Government in respect of vast stretches of land in Jamshedpur. The concerned premises is part of the long lease that the applicant enjoyed originally under the State of Bihar and now enjoys under the State of Jharkhand. The applicant had a right to sub-lease the land, which it did in favour of the company which was once part of the conglomerate to which the applicant belongs. There is a minor matter of the long lease having expired and not being renewed at the time that the applicant instituted the proceedings, but during the pendency the lease has been renewed.
4. The applicant asserts that the official liquidator has no use of the land for the beneficial winding up of the company and the funds in the hands of the official liquidator, and likely to come out of the assets of the company, would not permit the official liquidator to discharge the onerous covenant of paying lease rent in respect of the premises. There is also an earlier suit instituted by the applicant, with leave obtained under Section 446 of the Companies Act, 1956 ("the Act"), praying for a decree of eviction against the official liquidator as custodian of the assets of the company in liquidation, but the applicant has elected to proceed with this later application and abandon the suit.
5. Under a registered deed of March 3, 1963, the applicant demised in favour of the company a piece of land measuring about 0.59 acres within R. S. Plot No. 1861, Mouza Belidih, with a structure thereon for residential purposes within the town of Jamshedpur for a term of 10 years commencing December 1,1963, for the purpose of using the same as a guest house at an annual rental of Rs. 318. After expiry of the tenure, the company continued in possession of the premises on the same terms. The company was referred to the Board for Industrial and Financial Reconstruction ("the BIFR") in 1991 and following a recommendation made by the BIFR under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, this Court directed the company to be wound up on March 7, 2000. The property is at 2, Jubilee Road, Jamshedpur, a prominent address in the better part of that town. 1
6. In terms of the lease, the company erected a bungalow at the said premises and, according to the applicant, such property was never shown as belonging to the company in its balance-sheets nor had it been given as security for the substantial credit facilities obtained by the company. By a notice issued in April, 2001, the applicant called upon the official liquidator to make over possession of the premises. The suit, C. S. No. 212 of 2002, was filed before this Court shortly thereafter with a prayer for recovery of possession of the land and for the arrears of rent.
7. One of the banks and financial institutions which had made credit facilities available to the company, filed recovery proceedings and prayed for an order for sale of the securities held by them. T. A. No. 124 of 2001, was instituted by the Indian Bank before the Debts Recovery Tribunal-I, Calcutta, under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
8. In such proceedings, the bank applied for sale of the company's properties including its factory and manufacturing establishment at Adityapur, near Jamshedpur, and the concerned property at 2, Jubilee Road, Jamshedpur. The sale of the concerned property was confirmed in favour of one Prem Narayan Garg, but such sale was subsequently undone at the behest of the bank. Garg claims to be in possession of the premises.
9. Upon the applicant praying for a direction on the official liquidator to surrender the said property in its favour, Garg applied before this Court seeking leave to intervene in the proceedings. Leave was granted and Garg has used an affidavit. It is Garg's coming in of his own accord that has been fortuitous for the applicant.
10. C.A. No. 86 of 2007 has been taken out by Garg for leave to intervene in C.A. No. 376 of 2006. Pursuant to the leave granted on February 12, 2007, the applicant (the applicant in C. A. No. 376 of 2006 is referred to as the applicant in the entirety of this order) was directed to serve a copy of its application on Garg for Garg to use an affidavit thereto.
11. Garg has filed an affidavit on February 27, 2007 and at least one further affidavit shortly before the conclusion of the matter. Garg narrates the sequence of events following Indian Bank instituting proceedings against the company in liquidation in his attempt to assert his right in respect of the concerned property. According to Garg, the bank valued the said property situated in Jamshedpur at slightly over Rs. 1.5 crores. A special officer was appointed in the bank proceedings and he filed a report on September 1, 2004, wherein it was indicated that the Government of Bihar had leased out land in Jamshedpur in respect of the applicant herein which expired in December 31, 1995 and had not been renewed. The applicant had granted a sublease, the report carried on, in favour of the company and a guest house and out-house were constructed on the said land by the company.
12. Garg recounts that the applicant applied before the Debts Recovery Tribunal on January 19, 2004, for leave to participate in the sale of the guest house. A special officer was appointed to conduct the sale of the properties at Adityapur and Jamshedpur. According to Garg, his bid for the concerned property was the highest at Rs. 21.5 lakhs and he was only one of the two bidders who had put in the earnest deposit. The sale was confirmed, Garg asserts, by an order of January 20, 2004 and possession of the property was subsequently delivered to him. It was only just before the hearing was concluded herein that Garg filed a supplementary affidavit in which he relied on the minutes of a meeting held by a special officer appointed by the Debts Recovery Tribunal showing that possession of the land and the building thereat was made over to him.
13. Garg records in his original affidavit filed in these proceedings that the bank applied for sale of the concerned premises be set aside. Simultaneously, the bank preferred an appeal from the Debts Recovery Tribunal order of January 20, 2004. The appeal was disposed of on January 18, 2005, by directing the Tribunal to hear out the application seeking setting aside of the sale. Garg preferred a revisional application to this Court from the Debts Recovery Appellate Tribunal order of January 18, 2005. Such revisional application, Co. No. 90 of 2005, was disposed of on March 20, 2005, by directing the parties to maintain status quo as on that date in respect of the concerned property, but otherwise not interfering with the directions contained in the impugned order.
14. There were two applications before the Debts Recovery Tribunal in respect of the said property which were to be immediately heard out in terms of the Appellate Tribunal order, Garg's application for delivery of possession and the bank's application for setting aside the sale. On Garg's application for possession, an order was initially made on February 26, 2004, by directing an advocate present before the Tribunal to be appointed as special officer "to ensure the delivery of possession of this structure to the successful purchaser, Mr. Prem Narain Garg and if he finds any difficulty in the delivery of the possession, he may take the necessary police aid at the cost of the successful purchaser". It is such order which Garg adopts as his sheet-anchor and cites as his right to remain at the said premises. Garg exhorts that the company court does not sit in appeal over the Debts Recovery Tribunal orders and cannot undo, particularly in these proceedings, the effect of the Tribunal's order by which Garg was put into possession. In terms of the order of February 26, 2004, the special officer appointed by the Tribunal accompanied Garg to Jamshedpur and has recorded in the minutes relied upon in Garg's latest supplementary affidavit, that he "delivered the position (sic)" of the structure at the said premises to Garg.
15. Both Garg's application for delivery of possession and the bank's application for setting aside the order confirming the sale were disposed of by the Debts Recovery Tribunal's order of May 19, 2005. The order confirming the sale was recalled and Garg's application for delivery of possession was dismissed but Garg insists that since he was not required to surrender possession, he is entitled to continue in possession.
16. But before such argument put forth by Garg is taken up, it would be interesting to note what Garg had purchased and on what ground the bank challenged the order confirming the sale as recorded in the order of May 19, 2005:
(9) It appears from the perusal of the first application that the Indian Bank has challenged the sale of the structure of the guest house at 2, Jubilee Road, Jamshedpur, relying, inter alia, on the facts grounds firstly that whenever the intending purchasers have been prepared to bid for auction sale of the guest house property at 2, Jubilee Road, Jamshedpur, of the defendant-company, an observation came from the learned Presiding Officer that only the structure in the form of dismantle condition should be sold and the successful purchaser will get only debris. Even a note of caution has been uttered from the learned Presiding Officer that the intending purchasers before quoting the price should consider this aspect of purchasing the debris of the guest house structure. Secondly, that on January 19, 2004, the TISCO has proposed to participate in the auction and bid for sale and sought for time to get instruction from the headquarters at Jamshedpur about the price for the guest house structure to be offered by the TISCO and has been allowed only one day's time to come with the offer. Thirdly, that on January 20, 2004, the matter was taken up when many intending purchasers did not turn up due to an unfortunate observation of the learned Presiding Officer on January 19, 2004. Fourthly, that the learned lawyer for the bank requested for postponement of the sale of the impugned guest house on the grounds that adequate publicity for sale has not been given nor there was proper publication and proper reserve price has not been fixed since the valuation of the guest house with the possession right in the land has been valued at Rs. 1.51 crores, approximately. And fifthly, that TISCO has a preferential right to purchase the structure at present market price and above the valuation of the structure since the land on which the structure has been built is a leasehold land granted to the TISCO to the defendant-company, and the TISCO should be given reasonable time to bid.
17. The order dealt with the two applications filed on March 22, 2005 and April 8, 2005, by the present applicant before the Tribunal. The Tribunal's order of May 19, 2005, recorded that the interim sale of the property had been conducted and completed without ascertaining as to whether the property, i.e., the structure of the guest house at 2, Jubilee Road, Jamshedpur, either belongs to the defendant that is SCIL (India) Ltd., under liquidation or to TISCO Ltd. The Tribunal's order is clear and unambiguous:
(1) That the first application filed by the Indian Bank be and the same is allowed and the auction sale of the structure of the guest house at 2, Jubilee Road, Jamshedpur, vide order No. 34 dated January 20, 2004, of the Debts Recovery Tribunal-II is set aside.
(2) In consequence of the order at (1) above, the second application filed by the successful purchaser Prem Narayan Garg is not maintainable and, hence, dismissed.
(3) Learned Registrar of the Debts Recovery Tribunal-II is hereby directed to refund the purchase money deposited by the aforesaid successful purchaser in respect of the sale of the structure of the guest house at 2, Jubilee Road, Jamshedpur, within fifteen days from the date of receipt of this order.
18. It would, thus, appear that it was only the structure of the guest house that has been sold in favour of Garg and such sale was set aside. Garg's application for possession was, in such circumstances, found to be not maintainable and dismissed. Upon the dismissal of Garg's application, the interim order that had been made therein, directing the special officer to make over the property sold to Garg, could not survive. Garg can no longer rely on such order which stood vacated by the order of dismissal of his application, to insist that he is entitled to remain in possession of the guest house.]
19. The applicant has relied on the judgments reported at Ravindra Ishwardas Sethna v. Official Liquidator, High Court, Bombay , as to the scope of the liquidator's powers upon a company being wound up. The applicant has placed Vidyadhar Upadhyay v. Sree Sree Madan Gopal Jew [1990] 67 Comp Cas 394 (Cal) and Smt. Pushpa Devi Jhunjhunwalh v. Official Liquidator, High Court, Calcutta [1993] 1 Cal LJ 447, for the proposition that matters of such nature as urged by the applicant can be dealt with by the company court in course of the company's liquidation. The applicant has relied on Sakow Industries P. Ltd. (in liquidation), In re [1990] 67 Comp Cas 16 (Cal), for the proposition that if the official liquidator had no use of a lease-hold land in the course of winding up of the company, he should disclaim the same.
20. Garg has relied on Smt. Nirmala R. Bafna v. Khandesh Spinning and Weaving Mills Co. Ltd. and Asoka Ghose v. Official Liquidator, Remington Rand of India Ltd. (in liquidation) [2003] 3 CLT 608 : [2004] 121 Comp Cas 229 (Cal), to urge that matters of such nature need to be decided in a suit. Garg has cited ICICI Bank Ltd. v. Sidco Leathers Ltd. , to demonstrate that the jurisdiction of the Debts Recovery Tribunal under the 1993 Act is exclusive and is not subject to supervision by the company court presiding over the liquidation of a company directed to be wound up.
21. In the Smt. Nirmala R. Bafna v. Khandesh Spinning and Weaving Mills Co. Ltd. , the company in liquidation was a tenant and it was alleged that it had sub-let a portion of the tenanted portion with the consent of the landlord. The consent of the landlord was not established before the Bombay High Court. The Bombay High Court disbelieved the factum of the landlord's consent and directed the liquidator to take possession of the tenanted premises, but allowed the alleged sub-tenant to occupy a portion of the premises as agent of the official liquidator at a high rate of monthly compensation. The alleged subtenant had instituted a suit and sought subsequent leave under Section 446 of the Act to proceed in such suit. Before the Supreme Court it was established that the landlord had consented to the creation of the sub-tenancy. It was in such circumstances that the Bombay High Court's direction having the effect of dispossessing the alleged sub-tenant, was found to be unwarranted.
22. In the Asoka Ghose v. Official Liquidator, Remington Rand of India Ltd. (in liquidation) [2003] 3 CLT 608 : [2004] 121 Comp Cas 229 (Cal), a judgment rendered by a single judge of this Court, the actual possession was with a third party and it was held that such third party's interest could not be affected except by due process of law. It does not appear that either the Vidyadhar Upadhyay v. Sree Sree Madan Gopal Jew [1990] 67 Comp Cas 394 (Cal), judgment or the Smt. Pushpa Devi Jhunjhunwalla v. Official Liquidator, High Court, Calcutta [1993] 1 Cal LJ 447, was cited in the Asoka Ghose v. Official Liquidator, Remington Rand of India Ltd. (in liquidation) [2003] 3 CLT 608 : [2004] 121 Comp Cas 229 (Cal), matter. A Division Bench of this Court held in the Vidyadhar Upadhyay v. Sree Sree Madan Gopal Jew [1990] 67 Comp Cas 394, that upon notice to the person in occupation, an adjudication of the nature sought by the applicant in the present proceedings may be made and such process would be due process of law. It is undeniable that as long as the law of the land is applied and the person in occupation is permitted to urge whatever material he seeks to rely on in support of his possession, there is no embargo on an adjudication being made on such score by the company court in course of liquidation proceedings]
23. Here, Garg came in seeking leave to intervene, thus obviating any decision being made by the company court as to whether to permit the applicant to have Garg's right to possession tried in course of these proceedings or to leave the applicant to institute appropriate proceedings against Garg by merely requiring the official liquidator to notionally surrender the company's right to the property in favour of the applicant. Once Garg has come in, of his own accord, sought to produce all that he has in support of his right to retain possession of the property, there is no impediment in considering the entirety of the matter and Garg's rights. Garg can no longer be heard to urge that despite his intervention, he should be permitted to go out and the entire matter be required to be adjudicated afresh either in the applicant's suit or in fresh proceedings to be instituted by the applicant. Such a step would lead to multiplicity of proceedings which courts generally frown upon. J
24. It is not necessary that the issues involved in matters of such nature be answered in summary proceedings. If necessary, the company court can direct a full-scale trial and receive oral evidence. But the company court has to feel the need for receiving oral evidence. It is not found expedient, given the nature of the right that Garg asserts, to call for any oral evidence.
25. Despite the applicant questioning the special officer's minutes of February 29, 2004, upon it having been produced at a belated stage, even if the minutes show that Garg is in possession, the effect of the dismissal of Garg's application by the Tribunal's order of May 19, 2005, cannot be undone or be allowed to go unnoticed. Garg has not been able to show any semblance of a right to remain in possession, despite having preferred an appeal from the order of May 19, 2005 and despite not having received refund of the money put in by him.
26. The applicant has offered to waive all claims against the official liquidator on account of unpaid lease rent. The official liquidator has no use of the property for the beneficial winding up of the company. The payment of the lease rent, however small an amount, is an onerous covenant that the official liquidator is unable to discharge, what with the fantastic claims of the priority creditors and the meagre funds fetched by the sale of the company's assets.
27. There is a further aspect. The deed of 1963 provides that any structure that may be constructed on the land by the lessee would belong to the lessor upon expiry of the lease. The applicant has also relied on the judgment reported at Bhatia Co-operative Housing Society Ltd. v. D.C. Patel , for the proposition that a structure constructed on a demised land will vest in the lessor upon the lease expiring. I
28. There is no doubt that the land does not belong to the company in liquidation. But, since the applicant had applied before the Debts Recovery Tribunal for being permitted to participate in the sale of the structure, the applicant should be held to its bargain and it having voluntarily relinquished its rights under the deed of 1963 in respect of the structure. The applicant will pay Garg the amount paid by Garg and obtain full rights in respect of the structure. The net effect is that Garg need no longer be repaid out of the sale proceeds realised pursuant to the confirmation of sale made by the Debts Recovery Tribunal on January 20, 2004 and such money will now be available for distribution to the company's creditors in accordance with law. Ordinarily, Garg would have been entitled to interest on the sum that he has put in but in view of Garg's assertion that he has remained in possession, the interest is set off against the occupation charges that would be due from Garg.
29. The application is allowed.
30. Garg is declared to be a trespasser with no right to remain in possession of any part of premises No. 2, Jubilee Road, Jamshedpur, or any structure thereon. The official liquidator is directed to obtain police help, if necessary, for the purpose of removal of Garg and making over possession of the said premises to the applicant within a period of 10 weeks hereof. The applicant will pay costs assessed at 1,000 GMs to the official liquidator. There will be no order as to costs as against Garg.
31. Urgent photostat certified copies of this judgment, if applied for, be issued to the parties upon compliance with requisite formalities.
Later:
32. A prayer for stay has been made on behalf of Garg. In view of the 10 weeks' time granted by the order, such prayer is declined?